The Reasearch On The Impact Of Financial Literacy On Household Income And Mechanisms Of Rural Residents

Since 2004,the No.1 Document of the Central Committee of the Party has continued to focus on the issue of the three rural areas.In the No.1 Document of the Central Committee in 2023,it was pointed out that we should persistently make solving the "three rural areas" issue the top priority of the work of the whole Party,consolidate and expand the achievements of poverty eradication,and broaden the channels for farmers to increase their income and become rich.Although the current per capita disposable income of rural residents has increased significantly,it is still only 45% of the per capita disposable income of urban residents,and the income of rural residents is still low and the rural economy is still lagging behind.The issue of increasing the income of rural residents is not only the key to deepening rural reform,but also the key to solidly promoting rural development and realising rural revitalisation.With the development of inclusive finance,more and more rural residents are participating in the financial market,while the threshold of the financial market itself makes rural residents suffer from certain financial exclusion,which hinders the optimal allocation of financial resources and limits the increase of residents’ income.Financial literacy,as a special kind of human capital,can alleviate the financial exclusion suffered by residents and is one of the key factors to help them make better use of financial resources.In this context,it is important to explore the impact of financial literacy on the total household income of rural residents and the path of influence through credit constraints and promotion of entrepreneurship,in order to improve financial policies in rural areas and enhance the well-being of rural residents’ households.Therefore,this paper establishes a theoretical framework of financial literacy affecting residents’ income on the basis of combing domestic and international literature and relevant theories,and makes comprehensive use of the 2019 China Household Finance Survey database of Southwest University of Finance and Economics and the China Statistical Yearbook to construct a financial literacy indicator system,measure rural residents’ financial literacy using iterative factor analysis,establish an empirical model to verify the level of rural residents’ financial literacy.Thesis also uses instrumental variables to test for endogeneity and a mediating effect model to verify the mediating mechanisms of credit constraints and entrepreneurial behaviour respectively.Thesis finds that: firstly,the overall financial literacy level of rural residents is still low,with lower levels of financial literacy among women,the elderly,the less educated and the disadvantaged in underdeveloped areas.Secondly,financial literacy has a significant positive effect on the total household income of rural residents,and passes the endogeneity and robustness tests.Thirdly,the effect of financial literacy on income shows that the stronger the stronger,with higher Third,the effect of financial literacy on income is stronger for those with higher levels of financial literacy,and the effect of income is stronger for those with higher levels of income.Fourth,financial literacy can further increase income by alleviating the credit constraints of rural residents and increasing the probability of entrepreneurship of residents respectively,and passes the robustness test.According to the analysis,thesis makes the following recommendations: firstly,to establish a sound household financial literacy survey mechanism;secondly,to improve the institutional mechanism for educating rural residents;thirdly,to insist on "hard improvements" such as the construction of a digital village and rural financial infrastructure,and to grasp the "soft grip" of multi-channel publicity;fourthly,to strengthen credit support for rural areas and improve the availability of credit to farmers;fifthly,to strengthen support for entrepreneurship among rural residents and to give full play to the important role of entrepreneurship in increasing the income of farmers.