Abstract
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.
Original language | English |
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Pages (from-to) | 108-118 |
Number of pages | 11 |
Journal | Regional Science and Urban Economics |
Volume | 67 |
DOIs | |
Publication status | Published - Nov 2017 |
Keywords
- China
- Housing demand
- Informal borrowing
- Social capital
ASJC Scopus subject areas
- Economics and Econometrics
- Urban Studies