The Impact of Financial Literacy on Clean Cooking Fuel Choice Among Rural Households: Evidence from China

Abstract

Promoting clean cooking fuel adoption among rural households is critical for China’s rural energy transition. However, existing studies have largely overlooked the role of endogenous cognitive capabilities, particularly financial literacy, in shaping household energy choices. To fill this gap, this study uses 2018 China Family Panel Studies (CFPS) data and employs Probit and IV methods to investigate the association between financial literacy and clean cooking fuel choice among rural households, as well as the potential channels underlying this relationship. The results show that financial literacy is significantly and positively associated with clean cooking fuel adoption. Exploratory heterogeneity analysis further reveals that this positive association is more pronounced among households with lower educational attainment, and that the effect of financial literacy diminishes as the number of children in the household increases. Channel analysis suggests that financial literacy may operate through easing credit constraints, promoting non-agricultural employment and entrepreneurship, and enhancing social trust. These findings suggest that strengthening financial education and improving rural credit systems may help alleviate borrowing constraints and optimize livelihood strategies, thereby promoting the adoption of clean energy in rural households.