IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v125y2023ics026499932300189x.html
   My bibliography  Save this article

Does digital finance promote household consumption upgrading? An analysis based on data from the China family panel studies

Author

Listed:
  • Hu, Debao
  • Zhai, Chenzhe
  • Zhao, Sibo

Abstract

The relationship between digital financial development and household consumption has drawn much attention from both academia and policymakers. Previous studies have documented that digital financial development fosters the growth of household consumption expenditure, but little attention is paid to its impact on household consumption upgrading. Using China Family Panel Studies data and Digital Financial Inclusion Index, we examine the impact of digital financial development on Chinese household consumption structure. We find that the development of digital finance promotes household consumption upgrading. Liquidity constraints, payment convenience, investment efficiency and household risk-hedging ability are proven to be important channels in the mechanism. Our findings are robust to the dynamic GMM estimation and instrumental variable analysis. It implies that the government should devote more efforts to developing digital finance to promote consumption upgrading, and hence economic growth.

Suggested Citation

  • Hu, Debao & Zhai, Chenzhe & Zhao, Sibo, 2023. "Does digital finance promote household consumption upgrading? An analysis based on data from the China family panel studies," Economic Modelling, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:ecmode:v:125:y:2023:i:c:s026499932300189x
    DOI: 10.1016/j.econmod.2023.106377
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S026499932300189X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2023.106377?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrei A. Levchenko, 2005. "Financial Liberalization and Consumption Volatility in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 237-259, September.
    2. Pengpeng Yue & Aslihan Gizem Korkmaz & Zhichao Yin & Haigang Zhou, 2022. "The rise of digital finance: Financial inclusion or debt trap," Papers 2201.09221, arXiv.org.
    3. Zhang, Yixing & Jia, Qinmin & Chen, Chen, 2021. "Risk attitude, financial literacy and household consumption: Evidence from stock market crash in China," Economic Modelling, Elsevier, vol. 94(C), pages 995-1006.
    4. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," The Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    5. Peterson K. Ozili, 2018. "Impact of digital finance on financial inclusion and stability," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 329-340, December.
    6. Chadwick C. Curtis & Steven Lugauer & Nelson C. Mark, 2015. "Demographic Patterns and Household Saving in China," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 58-94, April.
    7. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    8. Zhou, Xianbo & Sun, Yucheng & Tao, Ying, 2023. "Does Digital Finance Upgrade Trickle-down consumption effect in China?," Economic Modelling, Elsevier, vol. 118(C).
    9. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    10. Lianying Yao & Xiaoxiao Ma, 2022. "Has digital finance widened the income gap?," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-20, February.
    11. Lee, Chien-Chiang & Wang, Fuhao, 2022. "How does digital inclusive finance affect carbon intensity?," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 174-190.
    12. Pascaline Dupas & Jonathan Robinson, 2013. "Why Don't the Poor Save More? Evidence from Health Savings Experiments," American Economic Review, American Economic Association, vol. 103(4), pages 1138-1171, June.
    13. Marios Koufaris, 2002. "Applying the Technology Acceptance Model and Flow Theory to Online Consumer Behavior," Information Systems Research, INFORMS, vol. 13(2), pages 205-223, June.
    14. Barry Scholnick, 2013. "Consumption Smoothing after the Final Mortgage Payment: Testing the Magnitude Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1444-1449, October.
    15. Zerong Wang & Donghao Zhang & Jiancheng Wang, 2022. "How does digital finance impact the leverage of Chinese households?," Applied Economics Letters, Taylor & Francis Journals, vol. 29(6), pages 555-558, March.
    16. Ozili, Peterson Kitakogelu, 2018. "Impact of Digital Finance on Financial Inclusion and Stability," MPRA Paper 84771, University Library of Munich, Germany.
    17. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
    18. Li, Jie & Wu, Yu & Xiao, Jing Jian, 2020. "The impact of digital finance on household consumption: Evidence from China," Economic Modelling, Elsevier, vol. 86(C), pages 317-326.
    19. Yue, Pengpeng & Korkmaz, Aslihan Gizem & Yin, Zhichao & Zhou, Haigang, 2022. "The rise of digital finance: Financial inclusion or debt trap?," Finance Research Letters, Elsevier, vol. 47(PA).
    20. Minli Yu & Fu-Sheng Tsai & Hui Jin & Hejie Zhang, 2022. "Digital finance and renewable energy consumption: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-19, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Jie & Wu, Yu & Xiao, Jing Jian, 2020. "The impact of digital finance on household consumption: Evidence from China," Economic Modelling, Elsevier, vol. 86(C), pages 317-326.
    2. Zhao, Chunkai & Wu, Yaqian & Guo, Jianhao, 2022. "Mobile payment and Chinese rural household consumption," China Economic Review, Elsevier, vol. 71(C).
    3. Dongjing Chen & Xiaotong Guo, 2023. "Impact of the Digital Economy and Financial Development on Residents’ Consumption Upgrading: Evidence from Mainland China," Sustainability, MDPI, vol. 15(10), pages 1-25, May.
    4. Song, Quanyun & Li, Jie & Wu, Yu & Yin, Zhichao, 2020. "Accessibility of financial services and household consumption in China: Evidence from micro data," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    5. Wang, Jianqiu & Yin, Zhichao & Jiang, Jialing, 2023. "The effect of the digital divide on household consumption in China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    6. Jiang, Kangqi & Chen, Zhongfei & Rughoo, Aarti & Zhou, Mengling, 2022. "Internet finance and corporate investment: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    7. Siqi Huang & Nik Hadiyan Nik Azman, 2023. "Enhancing Food Security through Digital Inclusive Finance: Evidence from Agricultural Enterprises in China," IJERPH, MDPI, vol. 20(4), pages 1-20, February.
    8. Lee, Chien-Chiang & Lou, Runchi & Wang, Fuhao, 2023. "Digital financial inclusion and poverty alleviation: Evidence from the sustainable development of China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 418-434.
    9. Somville, Vincent & Vandewalle, Lore, 2023. "Access to banking, savings and consumption smoothing in rural India," Journal of Public Economics, Elsevier, vol. 223(C).
    10. Haibo Lei & Qin Su, 2023. "Does the Use of Digital Finance Affect Household Farmland Transfer-Out?," Sustainability, MDPI, vol. 15(16), pages 1-18, August.
    11. Kai Dong & Ching-Ter Chang & Shaonan Wang & Xiaoxi Liu, 2021. "The Dynamic Correlation among Financial Leverage, House Price, and Consumer Expenditure in China," Sustainability, MDPI, vol. 13(5), pages 1-18, March.
    12. Krzysztof Waliszewski & Ewa Cichowicz & £ukasz Gêbski & Filip Kliber & Jakub Kubiczek & Pawe³ Niedzió³ka & Ma³gorzata Solarz & Anna Warchlewska, 2023. "The role of the Lendtech sector in the consumer credit market in the context of household financial exclusion," Oeconomia Copernicana, Institute of Economic Research, vol. 14(2), pages 609-643, June.
    13. Lanhua Zhang & Manxiu Ning & Chaoying Yang, 2023. "Evaluation of the Mechanism and Effectiveness of Digital Inclusive Finance to Drive Rural Industry Prosperity," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    14. Yue, Pengpeng & Korkmaz, Aslihan Gizem & Yin, Zhichao & Zhou, Haigang, 2022. "The rise of digital finance: Financial inclusion or debt trap?," Finance Research Letters, Elsevier, vol. 47(PA).
    15. PU, Zhengning & FEI, Jinhua, 2022. "The impact of digital finance on residential carbon emissions: Evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 515-527.
    16. Mr. Christopher Carroll & Mr. Martin Sommer & Mr. Jiri Slacalek, 2012. "Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects," IMF Working Papers 2012/219, International Monetary Fund.
    17. Ren, Xiaohang & Zeng, Gudian & Zhao, Yang, 2023. "Digital finance and corporate ESG performance: Empirical evidence from listed companies in China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    18. d’Astous, Philippe, 2019. "Responses to an anticipated increase in cash on hand: Evidence from term loan repayments," Journal of Banking & Finance, Elsevier, vol. 108(C).
    19. Heping Ge & Lianzhen Tang & Xiaojun Zhou & Decai Tang & Valentina Boamah, 2022. "Research on the Effect of Rural Inclusive Financial Ecological Environment on Rural Household Income in China," IJERPH, MDPI, vol. 19(4), pages 1-16, February.
    20. Wei Yang & Peng Yang & Huaiwang Shi & Weizeng Sun, 2022. "Mobile Payment Application and Rural Household Consumption—Evidence from China Household Finance Survey," Sustainability, MDPI, vol. 15(1), pages 1-18, December.

    More about this item

    Keywords

    Digital finance; Household consumption; Consumption upgrading; China Family Panel Studies;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G5 - Financial Economics - - Household Finance
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:125:y:2023:i:c:s026499932300189x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.