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Financial mechanism of digital rural construction in promoting agricultural productivity and rural modernization

Author

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  • Song, Qinyue
  • Han, Zhenfu
  • Shi, Zhengxin

Abstract

This paper examines the financial mechanism through which digital rural construction (DRC) promotes agricultural productivity and rural modernization in China. We construct composite indices for DRC, new-quality agricultural productivity (NQP), and modernization using principal component analysis and standardized indicators and estimate two-way fixed-effects models on a multiyear prefecture panel. Robustness checks and instrumental-variable tests support the reliability of the empirical results. The findings show that DRC significantly advances rural modernization, partly through a financial channel that improves access to digital-inclusive finance, agricultural credit, and financial depth. The mediating role of NQP suggests that finance converts digital investment into productivity and innovation gains. The effects are stronger in regions with developed financial systems, effective intellectual property protection, and high digital readiness. The results imply that policy should integrate financial development and inclusive digital finance with digital-infrastructure investment to support sustainable agricultural modernization.

Suggested Citation

  • Song, Qinyue & Han, Zhenfu & Shi, Zhengxin, 2026. "Financial mechanism of digital rural construction in promoting agricultural productivity and rural modernization," Finance Research Letters, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:finlet:v:92:y:2026:i:c:s1544612326000103
    DOI: 10.1016/j.frl.2026.109478
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