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Total factor productivity and digital financial inclusion: The nonlinear role of human capital

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  • Kong, Xiangyi
  • Xu, Jinghui

Abstract

This study explores the impact of digital financial inclusion on high-quality productivity across 31 Chinese provinces (2011–2023), emphasizing the nonlinear role of human capital. Using an instrumental variable approach to address endogeneity, it shows that digital financial inclusion boosts productivity only when human capital exceeds certain thresholds—below which it may even hinder growth. The effects are more pronounced in regions with advanced technology markets, and are further amplified by innovation and employment density. These findings underscore the importance of aligning human capital development with digital finance initiatives.

Suggested Citation

  • Kong, Xiangyi & Xu, Jinghui, 2026. "Total factor productivity and digital financial inclusion: The nonlinear role of human capital," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026236
    DOI: 10.1016/j.frl.2025.109374
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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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