Self-Employed Versus Paid-Employed: What are the Different Preferences for Microfinance? Experimental Evidence From Rural China

Abstract

Microfinance has gained significant importance in supporting the livelihoods of individuals in developing economies. This paper examines the influence of self-employment on preferences for microfinance, based on the hypothesis that self-employment choices and participation in microfinance share the same decision-making ability. The analysis utilizes data from a recent survey conducted in rural China, employing a generalized multinomial logit model (GMNL) to account for both preference heterogeneity and scale heterogeneity. This model allows us to investigate the choice probabilities and the impact of different types of self-employment on preferences for microfinance attributes. The empirical findings indicate that engaging in self-employment contributes to a sense of reassurance regarding preferences for microfinance among rural respondents. Specifically, non-agricultural self-employment has a positive effect on this preference, whereas agricultural self-employment has a negative effect.