Rural households’ financial resilience, risk preference and non-farm employment based on micro data from CHFS

Abstract

Abstract Amid rising macroeconomic volatility, household financial resilience has emerged as a pivotal factor shaping labor reallocation among China’s rural population. Using microdata from the China Household Finance Survey (CHFS), this study employs logit and tobit models to examine whether–and through what mechanisms–financial resilience influences rural households’ participation in non-farm employment. Results reveal a robust positive association between financial resilience and non-farm engagement, mediated through the amplification of risk preference. The analysis further reveals that this positive influence is more pronounced among risk-averse households, indicating a moderating role of risk preference. Disaggregating resilience into liquidity, savings, and debt reveals heterogeneous effects: liquidity and savings buffers enhance non-farm employment through increased risk tolerance, while debt pressure exhibits dual causality–constraining risk appetite yet compelling necessity-driven reallocation. Our results highlight the significant impact of financial resilience on rural labor market transitions and uncover the opposing effects of its functional components. These insights are valuable for designing targeted interventions to bolster financial resilience, enhance pro-poor labor market integration, and ultimately narrow China’s urban-rural income divide.

Keywords

• Non-farm employment
• Rural households
• Household financial resilience
• Risk preference