The common prosperity effect of rural households' financial participation: a perspective based on multidimensional relative poverty

Abstract

Introduction: Common prosperity holds significant importance in ensuring social equity, promoting sustainable economic growth, and achieving long-term national security. The management of multidimensional relative poverty is a crucial pathway to realizing the common prosperity of all individuals. It is worthwhile to investigate whether the formal and informal financial involvement of rural households can synergistically alleviate multidimensional relative poverty, ultimately contributing to the realization of common prosperity.

Methods: Using data from 5,303 farm households in the 2018 China Family Panel Studies, this study employs multiple linear regression, instrumental variable methods, and propensity score matching to empirically analyze the common prosperity effect of formal and informal financial participation from the perspective of multidimensional relative poverty.

Results: The research demonstrates that both formal and informal financial participation can alleviate multidimensional relative poverty, with formal financial participation exhibiting a more pronounced poverty reduction effect compared to informal financial participation. Mechanism analysis reveals that both forms of financial participation mitigate multidimensional relative poverty by facilitating land transfer and non-farm employment. Heterogeneity analysis reveals that formal financial participation yields a more pronounced poverty reduction effect among rural households experiencing lower levels of multidimensional relative poverty, whereas informal financial participation is more effective in reducing poverty among rural households facing higher levels of multidimensional relative poverty.

Discussion: To achieve common prosperity and enhance the precision of financial interventions for poverty alleviation, it is recommended to leverage the strengths of formal finance over informal finance, enhance financial assistance for land transfer and non-farm employment, and implement tailored financial support policies.

Keywords: common prosperity; formal financial participation; informal financial participation; land transfer; multidimensional relative poverty; non-farm employment.