Rural finance, scale management and rural industrial integration

The purpose of this paper is to empirically investigate the effect of rural finance on industrial integration of rural primary, secondary and tertiary industries.

Using household-level data collected by Third National Agricultural Census and the provincial-level data collected from Wind database, the authors estimated the impacts of rural finance on rural industrial integration using Logit and Probit regression models. Further, the authors examined how the effect of rural finance varies with the age and education of householders, and with household and provincial characteristics by investigating the moderating effect.

The findings show that rural finance has a significant and positive effect on promoting farmers’ participation in new agricultural management organizations. This effect is more obvious in families whose householders are 40–50 years old, or families that have more educated members. This is because the middle-aged or educated people are more willing to accept and take part in industrial integration. The results further indicate that rural finance has a greater effect on industrial integration in provinces with a high degree of marketization, and in provinces with the high output value of industries and services in agricultural intermediate input.

The authors investigated the impact of rural finance on rural industrial integration empirically, and this topic is rarely covered before. The findings of this study also enrich the literature on financial development and economic growth as well as provide policy suggestions on how to promote rural industrial integration.