Confucian culture and informal household financing: Evidence from China's counties

Abstract

A growing body of literature is investigating the social and cultural determinants of household financing activity. This paper examines the impact of traditional culture, specifically Confucian culture in China, on informal household financing at the county level. We find that Confucian culture has a significant and positive impact on informal household financing activity, and a higher degree of digitally inclusive finance can strengthen the positive relation between Confucian culture and informal household financing. This positive relation between culture and financing appears to be stronger in regions where Chinese traditional culture is well preserved and more pronounced in regions with a better business environment. Our study offers insights for policy makers, revealing the importance of the impact of cultural factors on informal financial activity in emerging economies based on their particular cultural traditions.

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