The Impact Of Financial Literacy On The Relative Poverty Resilience Of Rural Households

Since China achieved the goal of shaking off poverty in 2020,the direction of poverty governance has shifted from absolute poverty to relative poverty.How to achieve common prosperity and solve the problem of income gap has become a hot topic.Relative poverty resilience,as an indicator of the likelihood of a household’s future welfare falling below the relative poverty line,has become a common proxy indicator for identifying potentially relatively poor households and reflecting the quality of poverty eradication due to its dynamic and forward-looking nature.In addition,household capability has also become a hot topic in addressing relative poverty,and household financial literacy,as a combination of financial knowledge and practical application,is an important component of household human capital.There is still a huge gap between rural and urban areas in terms of both relative poverty resilience and financial literacy.The lack of financial literacy among rural households is a typical characteristic of capability poverty,which affects the relative poverty resilience of rural households through certain transmission mechanisms.Based on the theoretical derivation and analysis of the current situation of financial literacy and the relative poverty resilience of rural households,this paper will examine the causal relationship between the two and reveal their impact mechanism.This paper selects data from the newly released China Household Finance Survey(CHFS)2019 and firstly screens the rural households in the sample for a baseline empirical study,using factor analysis and VEP methods to estimate the data of financial literacy and relative poverty resilience of rural households respectively.Household head characteristics,household characteristics and geographical characteristics variables were also included as control variables in the baseline regression.Instrumental variables were used for endogeneity test.Further,the propensity score matching method was used as a robustness testto refine the results of the empirical analysis.A mechanism analysis was conducted based on the baseline model to verify the mediating effects of rural households’ entrepreneurial status,insurance participation and risky asset holdings in the mechanism.In the heterogeneity analysis it was demonstrated that the impact of financial literacy on the relative poverty resilience of rural households differed across regions,incomes and educational attainment of rural households.The findings show that:(1)the financial literacy of rural residents in China is still at a low level,and there is a large gap in the level of financial literacy between urban and rural households;(2)the improvement of financial literacy has the effect of alleviating relative poverty;(3)financial literacy affects the relative poverty resilience of rural households through three channels:increasing the proportion of risky assets of rural households,increasing the participation of rural households in insurance and enhancing rural households’ entrepreneurship.Based on the theoretical derivation,current situation analysis and empirical results,this paper proposes four policy suggestions: establishing a relative poverty household identification system,establishing a mechanism to prevent a financial return to poverty,cultivating rural households’ digital financial literacy and strengthening the synergistic education of rural households’ financial literacy and entrepreneurship.To a certain extent,it provides some reference for relative poverty governance and long-term poverty eradication in the new era.Based on the theoretical analysis and empirical results,this paper puts forward some suggestions on the dynamic identification of relative poverty,the improvement of financial literacy level and the mechanism of financial prevention of poverty return.On the one hand,it provides some evidence for poverty alleviation and long-term poverty alleviation in the new era;on the other hand,it complements the research on the correlation between financial literacy and relative poverty resilience to a certain extent.