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Impact of Digital Financial Inclusion on Consumption Inequality in China

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  • Juan Luo

    (Hunan Normal University)

  • Bao-zhen Li

    (Hunan Normal University)

Abstract

In this paper, we investigate the effect of digital finance inclusion (DFI) on household consumption inequality in China. Based on the biennial panel data of China Household Finance Survey from 2015 to 2017 and the county-level DFI index, we empirically analyze the impact of DFI on consumption inequality by using fixed effect model. We find that the development of DFI can significantly reduce the consumption inequality among residents. This is partly because DFI can reduce the income inequality among residents. And the development of DFI has different marginal impact on consumption expenditure for different residents, thus leading to the reduction of the residents consumption gap. We also find that, compared to the extensive usage and the degree of digitization, the intensive usage of DFI has larger effects on lowering consumption inequality. In addition, the effects of DFI on consumption inequality have significant heterogeneity, and they are relatively larger for residents in eastern regions, and for households with low debt-to-income ratios and for individuals with compulsory education. Therefore, it is necessary to attach importance to supporting construction in the western region when coordinating the development of digital inclusive finance. It is important to strengthen policy preference for residents with lower education levels in terms of school compulsory education and community public welfare education. Meanwhile, when developing the digital financial inclusion, we should focus on controlling the household debt-to-income ratio to prevent excessive debt growth.

Suggested Citation

  • Juan Luo & Bao-zhen Li, 2022. "Impact of Digital Financial Inclusion on Consumption Inequality in China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 163(2), pages 529-553, September.
    • Handle: RePEc:spr:soinre:v:163:y:2022:i:2:d:10.1007_s11205-022-02909-6
    DOI: 10.1007/s11205-022-02909-6
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