Debt-driven workforce: how credit growth shapes household labour supply

The response of labour supply is a key dimension of the relationship between credit conditions and labour market outcomes. Using panel data from the China Family Panel Studies (CFPS) covering 2014–2022, this study examines how provincial credit growth shapes household labour supply. We find that a one-percentage-point increase in the credit growth rate is associated with a 0.17-percentage-point increase in employment probability and a 0.13-hour increase in weekly working hours, with household debt, particularly mortgage debt, serving as an important channel. Heterogeneity analyses indicate that the relationship is stronger among less educated, married, male, and flexibly employed individuals. This study provides new empirical evidence that provincial is positively associated with household labour supply largely through greater indebtedness.