Factors influencing household debt structure under various credit constraints

Household debt is a critical component of family financial management, especially considering the prevalence of credit constraints. This study investigates the determinants of Chinese household debt structure, focusing on the choice between formal and informal borrowing and the proportion of formal debt under different credit constraints. Data from the 2018 China Family Panel Studies (CFPS) are analyzed using the bi-probit model. The results indicate that higher levels of household education and internet use significantly enhance the likelihood of accruing formal debt and weaken the tendency to engage in informal debt. This study innovatively employs the KZ index, traditionally used in corporate finance, to assess credit constraints at the household level. This new household credit constraint index demonstrates that the factors affecting the debt structure vary with the level of credit constraints, underscoring the complexity of household financial behaviors in China’s evolving credit landscape.