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Digital financial inclusion as a safety net: Empowering households against health shocks

Author

Listed:
  • Xu, Qingwen
  • Liu, Chun
  • Gong, Xingyu
  • Ma, Xiang
  • Liu, Ding

Abstract

This study provides the first empirical evidence on how digital financial inclusion enables households to better smooth consumption following health shocks. Leveraging panel data from the China Family Panel Studies (2014–2020), we find that health shocks significantly increase medical expenses and reduce household income, leading to lower non-medical consumption. Digital financial inclusion—encompassing online transfers, digital lending, and mobile wealth management—substantially mitigates these negative effects by expanding informal risk-sharing and enhancing self-insurance, especially for households with limited access to traditional insurance. Our analysis further reveals that digital financial inclusion offers more effective consumption smoothing than traditional bank credit. These findings highlight the critical role of digital financial inclusion in strengthening household resilience, promoting economic stability, and advancing inclusive growth.

Suggested Citation

  • Xu, Qingwen & Liu, Chun & Gong, Xingyu & Ma, Xiang & Liu, Ding, 2025. "Digital financial inclusion as a safety net: Empowering households against health shocks," Economic Modelling, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:ecmode:v:151:y:2025:i:c:s0264999325001890
    DOI: 10.1016/j.econmod.2025.107194
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I10 - Health, Education, and Welfare - - Health - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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