Understanding the Relationship between Financial Literacy and Chinese Rural Households’ Entrepreneurship from the Perspective of Credit Constraints and Risk Preference
Abstract
:1. Introduction
2. Theoretical Framework
2.1. Financial Literacy and Rural Households’ Entrepreneurship
2.2. The Mediating Role of Easing Credit Constraints
2.3. Moderating Role of Risk Preferences
3. Research Design
3.1. Research Data
3.2. Variable Definition and Description
3.2.1. Independent Variable
3.2.2. Dependent Variable
3.2.3. Control Variables
3.2.4. Instrumental Variable
3.2.5. Mediating Variable
3.2.6. Moderating Variable
3.3. Research Methods
3.3.1. Benchmark Method
3.3.2. Endogenous Treatment
3.3.3. Test Method of Mediating Effect and Moderating Effect
4. Results
4.1. Correlation between Financial Literacy and Rural Households’ Entrepreneurship
4.2. Mediating Role of Credit Constraints
4.3. Moderating Role of Risk Preference
4.4. Robustness Test
5. Discussion
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Dimension | Question | Variable | Assignment | Mean | SD |
---|---|---|---|---|---|
Interest rate | Suppose you have 100 now, and the annual interest rate of the bank is 4%. How much is the total amount of the five-year principal and interest? (A. Less than 120 yuan; B. More than 120 yuan; C. Equal to 120 yuan; D. I don’t know) | Answer the interest rate question | Choose D to be assigned 0, otherwise 1 | 0.234 | 0.424 |
Answer the interest rate question correctly | Choose C to be assigned 0, otherwise 1 | 0.200 | 0.400 | ||
Inflation and time value | Suppose you have 100 yuan now, the bank’s annual interest rate is 5%, and the inflation rate is 3% every year. After the 100 yuan is deposited in the bank for a year, what will you buy compared with what you buy now? (A. More; B. Less; C. Same; D. I don’t know) | Answer the inflation and time value question | Choose D to be assigned 0, otherwise 1 | 0.173 | 0.378 |
Answer the inflation and time value question correctly | Choose A to be assigned 0, otherwise 1 | 0.051 | 0.220 | ||
Stocks and funds | Do you think buying a stock alone is riskier than buying a stock fund? (A. Yes; B. No; C. I don’t know; D. I haven’t heard of stocks; E. I haven’t heard of funds; F. I haven’t heard of either) | Answer the stocks and funds question | Choose A or B to be assigned 0, otherwise 1 | 0.111 | 0.315 |
Answer the stocks and funds question correctly | Choose A to be assigned 0, otherwise 1 | 0.089 | 0.284 | ||
Venture portfolio | Do you think that, in general, planting (operating) multiple crops is less risky than planting (operating) one crop? (A. Yes; B. No; C. I don’t know) | Answer the venture portfolio question | Choose C to be assigned 0, otherwise 1 | 0.570 | 0.495 |
Answer the venture portfolio question correctly | Choose A to be assigned 0, otherwise 1 | 0.397 | 0.489 | ||
Financial information attention | Do you usually pay attention to economic and financial information? | Financial information attention | Very concerned, very concerned, general = 1; Little or no attention = 0 | 0.120 | 0.325 |
Variable | Variable Definition | Mean | SD | |
---|---|---|---|---|
Dependent variable | Entrepreneurship | Does your family start a business? (1 = Yes, 0 = No) | 0.112 | 0.315 |
Independent variable | Financial literacy | Calculated by factor analysis, the questions and answers are shown in Table 1 | 0 | 0.585 |
Control variables—individual characteristics | Age of household head | Unit: Year old | 63.35 | 10.52 |
Gender of household head | 1 = MaN; 0 = Female | 0.925 | 0.264 | |
Health status of household head | Self-identified health status (1 = incapacity; 2 = poor; 3 = medium; 4 = good; 5 = excellent) | 4.013 | 1.092 | |
Education of household head | Unit: year | 7.293 | 3.649 | |
Risk perception | What do you think about the risk of failure faced by entrepreneurship? (1 = unknown; 2 = relatively small; 3 = average; 4 = relatively big; 5 = very big) | 3.566 | 1.477 | |
Control variable—family characteristics | Number of families | How many people live in your family (for 6 months or more in a year)? | 3.057 | 1.600 |
Cadre | Are there any cadres in your family? (1 = Yes, 0 = No) | 0.157 | 0.364 | |
Party member | Are there any Party members in your family? (1 = Yes, 0 = No) | 0.309 | 0.462 | |
Number of entrepreneurs among relatives | How many of your relatives and friends start businesses? | 0.560 | 2.413 | |
Entrepreneurship failure experience | Has your family experienced any entrepreneurial failure since 2015? (1 = Yes, 0 = No) | 0.0160 | 0.124 | |
Control variable—village characteristics | Distance from the village to the nearest bank | Distance from the village committee to the nearest bank (available for counter business) (km) | 3.344 | 2.942 |
Entrepreneurship training | Number of entrepreneurship training organized by township governments in 2020 (times) | 1.887 | 1.347 | |
Financial Lectures | How many lectures on financial knowledge have been held in the village in 2020? (times) | 1.147 | 1.192 | |
Instrumental variables | Financial literacy level at a village level | Average financial literacy of others in the same village except himself | −0.002 | 0.206 |
Mediating variable | Traditional credit constraints | Do you understand the traditional credit business launched by banks and other formal financial institutions? (No application or application but no credit = 1; others = 0) | 0.957 | 0.204 |
Digital credit constraints | Do you understand the digital credit business launched by banks and other formal financial institutions? (No application or application but no credit = 1; others = 0) | 0.995 | 0.072 | |
Bank credit constraints | Do you understand the online credit business launched by Alipay, WeChat, and other network platforms? (No application or application but no credit = 1; others = 0) | 0.983 | 0.128 | |
Moderating variable | Risk preference | Which of the following investments would you prefer? (1 = investment with low risk, low risk, low return, and low loss; 2 = investment with medium risk, medium risk, medium return, and medium loss; 3 = investment with high risk, high risk, high return, and high loss) | 1.279 | 0.544 |
Model 1 | Model 2 | Model 3 | Model 4 | |
---|---|---|---|---|
Probit | Probit | IV-Probit | IV-Probit | |
Financial literacy | 0.346 *** | 0.173 *** | 1.026 *** | 0.746 ** |
(0.054) | (0.063) | (0.211) | (0.320) | |
Age of household head | −0.015 *** | −0.012 *** | ||
(0.004) | (0.004) | |||
Gender of household head | 0.120 | 0.172 | ||
(0.153) | (0.158) | |||
The health level of household head | 0.119 *** | 0.105 *** | ||
(0.040) | (0.041) | |||
Education level of household head | −0.007 | −0.022 | ||
(0.012) | (0.015) | |||
Risk perception | −0.029 | −0.043 | ||
(0.027) | (0.028) | |||
Number of families | 0.075 *** | 0.065 *** | ||
(0.023) | (0.024) | |||
Cadre | 0.060 | −0.002 | ||
(0.107) | (0.114) | |||
party member | −0.019 | −0.127 | ||
(0.091) | (0.110) | |||
Number of entrepreneurs among relatives | 0.135 *** | 0.124 *** | ||
(0.017) | (0.019) | |||
Entrepreneurship failure experience | 1.215 *** | 1.091 *** | ||
(0.224) | (0.240) | |||
Distance from the village to the nearest bank | 0.024 * | 0.027 ** | ||
(0.013) | (0.013) | |||
Entrepreneurship training | −0.014 | −0.017 | ||
(0.029) | (0.029) | |||
Financial lectures | −0.040 | −0.024 | ||
(0.034) | (0.036) | |||
Financial literacy at the village level | 0.819 *** | 0.600 *** | ||
(0.057) | (0.056) | |||
Constant | −1.238 *** | −1.128 *** | −1.245 *** | −1.147 *** |
(0.036) | (0.399) | (0.037) | (0.406) | |
LRχ2/Wald χ2 | 40.583 *** | 219.150 *** | 23.640 *** | 174.479 *** |
First stage F value | / | / | 207.70 | 39.01 |
endogenous Wald χ2 | / | / | 11.92 *** | 3.46 * |
N | 2278 | 2278 | 2278 | 2278 |
Path 1: Ease Traditional Credit Constraints | Path 2: Ease Digital Credit Constraints | Path 3: Ease Online Credit Constraints | |||||
---|---|---|---|---|---|---|---|
Model 5 | Model 6 | Model 7 | Model 8 | Model 9 | Model 10 | Model 11 | |
Entrepreneur | TCC | Entrepreneur | DCC | Entrepreneur | OCC | Entrepreneur | |
FL | 0.173 *** | −0.370 *** | 0.149 ** | −0.632 *** | 0.168 *** | −0.452 *** | 0.168 *** |
(0.064) | (0.076) | (0.065) | (0.121) | (0.065) | (0.096) | (0.065) | |
TCC | −0.466 *** | ||||||
(0.154) | |||||||
DCC | −0.301 | ||||||
(0.448) | |||||||
OCC | −0.164 | ||||||
(0.249) | |||||||
Controls | YES | YES | YES | YES | YES | YES | YES |
Wald χ2 | 146.414 *** | 136.305 *** | 157.059 *** | 93.708 *** | 146.839 *** | 87.285 *** | 148.005 *** |
Pseudo R2 | 0.137 | 0.138 | 0.143 | 0.256 | 0.137 | 0.153 | 0.137 |
N | 2278 | 2278 | 2278 | 2107 | 2278 | 2278 | 2278 |
Entrepreneurship | ||
---|---|---|
Model 13 | Model 14 | |
Financial literacy | / | 0.745 ** |
/ | (0.311) | |
Risk preference | 0.294 *** | 0.252 *** |
(0.062) | (0.071) | |
Risk preference * Financial literacy | / | −0.212 * |
/ | (0.114) | |
Controls | YES | YES |
Constant | −1.617 *** | −1.235 *** |
(0.397) | (0.419) | |
Wald χ2 | 166.86 *** | 189.970 *** |
First stage F value | / | 40.04 |
endogenous Wald χ2 | / | 3.75 * |
N | 2187 | 2187 |
CMP | IV-Probit | |
---|---|---|
Financial literacy | 0.568 *** | |
(0.209) | ||
New financial literacy | 0.489 ** | |
(0.213) | ||
Constant | −1.057 *** | −1.480 *** |
(0.392) | (0.439) | |
Financial literacy at the village level | 0.819 *** | 0.907 *** |
(0.057) | (0.106) | |
atanhrho_12/ F value | −0.242 * | 31.45 |
(0.129) | ||
LRχ2/Wald χ2 | 381.928 *** | 171.234 *** |
Endogenous Wald χ2 | / | 3.46 * |
N | 2278 | 2278 |
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Liu, S.; He, J.; Xu, D. Understanding the Relationship between Financial Literacy and Chinese Rural Households’ Entrepreneurship from the Perspective of Credit Constraints and Risk Preference. Int. J. Environ. Res. Public Health 2023, 20, 4981. https://doi.org/10.3390/ijerph20064981
Liu S, He J, Xu D. Understanding the Relationship between Financial Literacy and Chinese Rural Households’ Entrepreneurship from the Perspective of Credit Constraints and Risk Preference. International Journal of Environmental Research and Public Health. 2023; 20(6):4981. https://doi.org/10.3390/ijerph20064981
Chicago/Turabian StyleLiu, Silin, Jia He, and Dingde Xu. 2023. "Understanding the Relationship between Financial Literacy and Chinese Rural Households’ Entrepreneurship from the Perspective of Credit Constraints and Risk Preference" International Journal of Environmental Research and Public Health 20, no. 6: 4981. https://doi.org/10.3390/ijerph20064981