TY - JOUR
T1 - Informal borrowing and home purchase
T2 - Evidence from urban China
AU - Fan, Ying
AU - Wu, Jing
AU - Yang, Zan
N1 - Publisher Copyright:
© 2017 Elsevier B.V.
Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 2017/11
Y1 - 2017/11
N2 - In this paper, we provide a new explanation for the co-existence of huge housing demand and low dependence on mortgage loans in urban China, focusing on the effect of households’ informal borrowing from relatives and friends. Empirical analysis based on a national-level household survey suggests that because of the low financial cost of informal borrowing, households tend to borrow as much as possible from informal channels until they reach the constraint determined by their social capital, which significantly crowds out formal borrowing such as mortgage loans from commercial banks. Additionally, the existence of informal borrowing significantly increases households’ housing demand. Understanding these effects is especially important in regions with less mature financial systems.
AB - In this paper, we provide a new explanation for the co-existence of huge housing demand and low dependence on mortgage loans in urban China, focusing on the effect of households’ informal borrowing from relatives and friends. Empirical analysis based on a national-level household survey suggests that because of the low financial cost of informal borrowing, households tend to borrow as much as possible from informal channels until they reach the constraint determined by their social capital, which significantly crowds out formal borrowing such as mortgage loans from commercial banks. Additionally, the existence of informal borrowing significantly increases households’ housing demand. Understanding these effects is especially important in regions with less mature financial systems.
KW - China
KW - Housing demand
KW - Informal borrowing
KW - Social capital
UR - http://www.scopus.com/inward/record.url?scp=85030460525&partnerID=8YFLogxK
U2 - 10.1016/j.regsciurbeco.2017.09.003
DO - 10.1016/j.regsciurbeco.2017.09.003
M3 - Journal article
AN - SCOPUS:85030460525
SN - 0166-0462
VL - 67
SP - 108
EP - 118
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
ER -