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The impact of digital finance on households’ financial literacy

Author

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  • Cai, Dongsong
  • Kou, Junhao
  • He, Yao

Abstract

We construct a dynamic general equilibrium model with endogenous financial literacy accumulation to investigate the impact of digital finance on households' financial literacy. The model predicts that digital finance is able to raise households' financial literacy through the channels of learning-by-doing (LBD) and human capital externality (HCE). Then, we employ data from the 2017 and 2019 China Household Finance Survey (CHFS) to empirically test the impact of digital finance on household’s financial literacy. The empirical results show that digital financial usage (DFU) can raise household’s financial literacy level through the LBD channel, and the effect is stronger on the households with young and old and high educated household head, and on low income and low asset households. Furthermore, digital financial inclusion index (DFII) can increase household’s financial literacy through the HCE channel, and the effect is stronger on the households who use digital financial services and products. This paper extends the literatures that study the impact of digital finance on household economic behavior.

Suggested Citation

  • Cai, Dongsong & Kou, Junhao & He, Yao, 2025. "The impact of digital finance on households’ financial literacy," Economic Analysis and Policy, Elsevier, vol. 88(C), pages 687-704.
    • Handle: RePEc:eee:ecanpo:v:88:y:2025:i:c:p:687-704
    DOI: 10.1016/j.eap.2025.10.009
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    Cited by:

    1. Zhang, Dan & Zhao, Na, 2025. "Financial technology, collaborative innovation patent networks, and the formation of innovation clusters in emerging industries," Economic Analysis and Policy, Elsevier, vol. 88(C), pages 1566-1576.

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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • G00 - Financial Economics - - General - - - General
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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