The Impact of Financial Capability on Household Economic Resilience: Perspectives and Insights From China

Based on the 2017–2019 panel data from the China Household Finance Survey (CHFS), this paper measures financial capability using the entropy method and employs a Generalized Linear Model (GLM) to dynamically assess household economic resilience to explore the relationship between financial capability and household economic resilience. The results indicate that improvements in financial capability significantly enhance household economic resilience. Robustness checks—conducted through instrumental variable methods to address endogeneity, alternative measurements of the dependent and independent variables, and the exclusion of financial industry workers—confirm the reliability of the findings. Mechanism analysis reveals that financial capability strengthens household economic resilience primarily by easing credit constraints, optimizing asset portfolios, and facilitating wealth accumulation. Heterogeneity analysis shows that the impact of financial capability on household resilience is more pronounced among rural households, households in western regions, and those with medium levels of economic resilience. Further analysis uncovers that digital inclusive finance plays a substitutive role in the effect of financial capability on household economic resilience. This paper contributes to the literature on financial capability and household resilience and offers policy implications for enhancing household financial well-being.