Rural development in the digital age: Does information and communication technology adoption contribute to credit access and income growth in rural China?

Information and communication technology (ICT) plays an important role in rural livelihoods and household well-being. Therefore, this study examines the impact of ICT adoption on farmers' decisions to access credit and the joint effects of ICT adoption and access to credit on household income using 2016 China Labour-force Dynamics Survey data. Both recursive bivariate probit model and a selectivity-corrected ordinary least square regression model are employed for the analysis. The results show that ICT adoption increases the probability of access to credit by 12.8% in rural China and empowers rural women and farm households in relatively less-developed regions to access credit. ICT adoption and access to credit affect household income differently. ICT adoption significantly increases household income, while access to credit significantly reduces it, primarily because farmers do not use the acquired credit to invest in income-generating farm and off-farm business activities. ICT adoption has the largest positive impact on household income at the highest 90th quantile. Our findings suggest that improving rural ICT infrastructure to enhance farmers' ICT adoption and developing ICT-based financial products to enable households to access sufficient funds can improve rural household welfare.     

Credit card debt and consumption: evidence from household-level data

This research investigates the relationship between credit card debt and consumption using household level data. This is a departure from the previous studies which have used aggregate measures of consumption and general debt such as the Debt Service Ratio or total revolving credit. We use a detailed monthly survey of credit card use to impute credit card debt to respondents from the Consumer Expenditure Survey sample. In contrast to some earlier studies using aggregate data, we find a negative relationship between debt and consumption growth. Our work shows that a $1000 increase in credit card debt results in a decrease in quarterly consumption growth of almost 2%. Investigations are also made into effects of debt within different age categories and into the impact of expected income growth on the debt–consumption relationship.     

Does income inequality really matter for credit booms?

This paper addresses the question whether income inequality is associated with credit booms, alongside other macroeconomic factors. We distinguish between the different types of credit booms—real estate credit booms, household credit booms, firm credit booms and credit booms that turn into crises. Furthermore, our analysis of a sample of 70 countries between 1990 and 2016 does not provide any evidence of credit booms driving income inequality. We observe that capital inflows increase the likelihood of credit boom occurrence, while countries experiencing high economic growth tend to have more credit booms. Finally, we note that credit booms are more frequent in countries with fixed exchange rate regimes.     

Business cycle fluctuations and household saving in OECD countries: A panel data analysis

We investigate the cyclicality of the household saving to household disposable income ratio for a panel of 16 OECD countries over the period 1969–2012. We find evidence that the household saving ratio is countercyclical. We empirically investigate whether the determinants of saving suggested by a standard buffer stock model of saving can explain this finding. The three main determinants of household saving implied by such a model (i.e., unemployment risk, household wealth and credit constraints) have a significant impact on the household saving ratio while their combined effect completely offsets its countercyclicality. The saving regression results are robust to potential endogeneity of the regressors, to making use of a reduced sample size that leaves out the period of the Great Recession, and to the one-by-one addition of variables suggested by alternative theories that also predict a countercyclical saving ratio.     

Forecasting household debt with latent transition modelling

Latent transition modelling (LTM) was used to forecast household debt patterns. A model based on three waves (2011, 2013 and 2015) and over 36,000 responses from the biennial panel study of Polish households – Social Diagnosis – provided data for these forecasts. Based on the fact that transitions between latent states are shaped by previous latent states and socio-economic covariates – age of household head, income and number of household members – we were able to demonstrate LTM as a tool to generate aggregate predictions for both medium- and long-term evolution of the household credit market. The declining tendency for household credit participation rates in Poland is expected in the longer term. In particular, the trend should be supported by decline in the proportion of mortgage debtors. The groups of households indebted for the consumption of durables and those seeking credit outside the banking sector are the groups predicted to remain stable or increase in size.     

Income Distribution and Aggregate Saving: A Non‐Monotonic Relationship

Drawing on a panel of advanced economies, this paper documents a concave and non‐monotonic link between inequality and the aggregate household saving rate. We find that, at a low level of inequality, more inequality is associated with higher saving; but we also show that a negative relationship between inequality and saving prevails where inequality is high. Using different empirical approaches, we locate the turning point, where the marginal effect of inequality turns from positive to negative, at a net income Gini coefficient of around 30. Moreover, we show that the relationship between inequality and saving also depends on financial market conditions. While inequality increases saving, when credit is scarce it tends to reduce saving at high levels of credit. This paper primarily focuses on household saving, yet we also find some evidence for a non‐monotonic effect of inequality on private saving, national saving, and the current account balance.     

Broke,Ill, and Obese: Is There an Effect of Household Debt on Health?

We analyze the association between household indebtedness and different health outcomes using data from the German Socio‐Economic Panel from 1999 to 2009. We control for unobserved heterogeneity by applying fixed‐effects methods and furthermore use a subsample of constantly employed individuals plus lagged debt variables to reduce problems of reverse causality. We apply different measures of household indebtedness, such as the percentage shares of household income spent on consumer credit and home loan repayments (which indicate the severity of household indebtedness) and a binary variable of relative overindebtedness (which indicates a precarious debt situation). We find all debt measures to be strongly correlated with health satisfaction, mental health, and obesity. This relationship vanishes for obesity after controlling for unobserved heterogeneity while it stays significant with respect to worse physical and mental health.     

Comments on Articles by Eli Ginzberg and Manley Irwin and Kenneth B. Stanley

Financial institutions engage in financial innovation to increase profits. The resulting increases in consumer debt, however, make low income groups vulnerable to declines in income; households headed by women are particularly vulnerable. Consumers are disadvantaged given the asymmetry between business and consumer choices. Consumers use credit for many reasons including pecuniary emulation and supporting others, support that often falls to women. The paper examines the ratio of debt to financial assets, the ratio of debt to income, the ratio of dept payments to income, and the rate of bankruptcy as indicators of the fragility of household balance sheets.     

Credit cards and aggregate money demand

This paper attempts to assess the effect of the growth in the use of credit cards upon aggregate household money holdings. In an inventory theoretic structure, when individuals have the choice of whether to use a credit card as an alternative means of payments, and with a given income distribution, the aggregate money demand relation is derived. It is shown that the existence of an alternative means of payment changes the predictions on the relevant elasticities from the standard model, and makes them variable over time, and gives some indication of how credit card growth causes shifts in aggregate money demand.     

Debt and credit: Recent Canadian developments

In our examination of how recent developments (to 1988) in debt and credit markets have affected the Canadian economy, we compare the recent experience of borrower behavior in Canada with that in the United States, looking at debt-GDP ratios for various sectors and the corporate debt-equity ratio. In the late 1980s, the key differences between the two countries in the financial behavior of both the household and corporate sectors derive, we believe, from the sharper shock faced by Canadians in the early 1980s. Our examination of the relationship between credit growth and the growth of spending in the Canadian economy utilizes credit-indicator models developed at the Bank of Canada. We find that over the 1980–1987 period forecasts of the growth of real GDP and nominal GDP based on indicator models using real total household credit and nominal consumer credit, respectively, have narrowly outperformed the best bivariate monetary indicator models.     

Housing market dynamics and macroprudential policies

In this paper, we analyze the implications of macroprudential and monetary policies for credit cycles, housing market stability and spillovers to consumption. We consider a countercyclical loan‐to‐value (LTV) policy that responds to a credit‐to‐income ratio, and we compare its effectiveness with a permanent tightening of the LTV ratio and a monetary policy rule that responds to credit. To this end, we construct a dynamic stochastic general equilibrium model with housing market, household debt and collateral constraints, and we estimate it with Canadian data using Bayesian methods. Our study suggests that a countercyclical LTV ratio is a useful policy to reduce spillovers from the housing market into consumption and to lean against housing market boom–bust cycles. It performs better than the permanent tightening of the LTV ratio—a policy that has been used in a number of countries—and the monetary policy rule, both in terms of the stabilization of household indebtedness and spillovers into consumption. Monetary policy that leans against the wind is the least desirable due to its large adverse consequences on the real economy.     

Inequality and Crisis: Conspicuous Consumption as the Missing Link in the Portuguese Case

Portuguese household debt increased above GDP between 2000 and 2007. This article uses conspicuous consumption to explain credit demand dynamics. The author develops an institutionalist framework and consider how rapid high inequalities and increasing top income share favored conspicuous consumption and climbing household debt.     

THE IMPACT OF CASINO GAMBLING ON PERSONAL BANKRUPTCY FILING RATES

Personal bankruptcies soared in the United States between 1994 and 1998. One activity that can precipitate personal financial crises and that has also experienced dramatic growth is commercial gambling, especially casino gambling. This article builds a simple model of bankruptcy choice and empirically tests the model using unique county-level data on debt, income, household age, population density, and casino gambling as well as state measures of employment and marital stability, health insurance coverage, and garnishment restrictions. The authors find that the proximity of casino gambling appears to be associated with higher bankruptcy rates, but that the local impact is far more pronounced than the influence of casino gambling on the national filing rate. To quantify the magnitude of the impact, the analysis predicts over a 5% decline in 1998 filing rates for counties surrounding a casino, and a 1% decline in the nationwide filing rate if one were to eliminate casino gambling. Consequently, although casino gambling exerts important local effects, nationwide the incidence and growth of casino gambling does not explain much of the rise in bankruptcies during the past decade.     

Econometric analysis of credit constraints of chinese rural households and welfare loss

Using recent survey data of Chinese rural households, we estimate the impact of credit constraints on Chinese rural households’ income and consumption. Results reveal that 71% of rural households are rationed in the credit markets. The credit constraints have significant negative effects on the income and consumption of rural households. The expenditures on education and medical treatments, the size of land holdings, household head education and the balance of financial capital all affect the demand of credit. Personal connections (relationship) are the most important determinate of the supply for credit.     

Household Debt,Consumption, and Income Inequality

Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.     

Negative income taxes,inequality and poverty

We use a neoclassical growth model with heterogeneous agents to analyze the redistributive effects of a negative income tax system, which combines a flat rate tax with a fully refundable credit (“demogrant”). We show that changing the demogrant‐to‐output ratio causes significant changes in the distribution of income. Specifically, we find that increasing the demogrant‐to‐output ratio sharply reduces the level of inequality as well as both relative and absolute poverty (all measured in terms of post‐tax total income). However, these reductions in inequality and poverty come at the expense of a significant reduction in output.     

Microcredit,Labor, and Poverty Impacts in Urban Mexico

Improved household accessibility to credit is a significant determinant of intra‐household allocation of labor resources with important implications for productivity, income, and poverty status. However, credit accessibility could also have wider impacts on poverty if it leads to new hires outside the household. This paper contributes to the existing literature on microcredit in two important ways. First, it investigates the routes through which microcredit reaches those in poverty outside the household. We test whether by lending to the vulnerable non‐poor microcredit can indirectly benefit poor laborers through increased employment. Second, we conduct the study in the context of urban poverty Mexico. This is relevant when considering that labor often represents the only source of livelihoods to the extreme urban poor. Our findings point to significant trickle‐down effects of microcredit that benefit poor laborers; however, these effects are only observed after loan‐supported enterprising households achieve earnings well above the poverty line.     

Fertility choice and financial development

We study the consequences of broader access to credit and capital markets on household decisions over the number of children. A model of the net reproduction rate is estimated on data from 78 countries over the period 1995–2010. Liquidity constraints are approximated by private credit and household credit, while opportunities for financial investment are measured by domestic public debt. We use the Index of Financial Liberalisation (Abiad et al., 2009) as one of the instruments for financial variables. We find that improved access to credit increases fertility with an elasticity of around 30%, while the effect of the development of capital markets is negative (–10%). The regression model takes the role of social security into account. Quantile regression shows that our results are robust to outliers and parameter heterogeneity.     

WHERE IS THE MISSING CREDIT CARD DEBT? CLUES AND IMPLICATIONS

I create comparable estimates of aggregate credit card use based on household data from the Survey of Consumer Finances (SCF) and industry data. The two sources match up well on credit card charges and fairly well on account totals. But the SCF always yields much lower estimates of revolving debt. My estimated lower bound for the discrepancy in 2004 is half of the revolving credit card debt total implied by industry data. There is no obvious source for this remaining discrepancy and some evidence that the discrepancy has grown over time. Such growth is worrisome because it parallels substantial changes in credit card use and in the pool of credit card users, suggesting that the discrepancy could be driven by household underreporting that is correlated with unobserved heterogeneity. This correlation could confound inference on the relationship between credit card borrowing and outcomes of interest like household financial condition, consumption paths, and portfolio choice. Given this possibility it is critical to continue developing evidence on whether and why household surveys undercount credit card borrowing.     

A Different Perspective on the Evolution of UK Income Inequality

This paper scrutinizes the conventional wisdom about trends in UK income inequality and also places contemporary inequality in a much longer historical perspective. We combine household survey and income tax data to provide better coverage of all income ranges from the bottom to the very top (and make our estimates available to other researchers). We make a case for studying distributions of income between tax units (i.e. not assuming the full income sharing that goes with the use of the household as the unit of analysis) for reasons of principle as well as data harmonization. We present evidence that income inequality in the UK is as least as high today as it was just before the start of World War 2.