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Has digital finance widened the income gap?

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  • Lianying Yao
  • Xiaoxiao Ma

Abstract

Using the statistical data of 280 prefectural-level cities in China from 2011 to 2020, this paper empirically tests the relationship between digital finance and residents’ income in a linear and nonlinear model based on the G-J model theory, respectively. The study aims to discuss and analyze the impact of digital finance development on income distribution in the context of the current situation of digital finance development in China and further explore how to make digital finance better regulate the income distribution of residents. The innovation of this paper is to use two nonlinear methods to verify the Kuznets effect and threshold characteristics of digital financial development affecting the income distribution of residents based on linear analysis and explore the relationship between n digital economic development the current income gap more comprehensively. The study shows a Kuznets effect of digital finance development on the income distribution of Chinese residents. Thus, most regions in China have not yet crossed the inflection point of the bell-shaped curve, and the income gap within areas will continue to increase with the development of digital finance. By constructing a threshold model, it is found that the positive effect of digital finance on income disparity may initially increase with the increase of regional economic level. Still, when the regional economic development reaches a higher stage, the effect will tend to fall back. As a result, the negative impact of digital finance development on residents’ income distribution will be significantly reduced at that time.

Suggested Citation

  • 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.
    • Handle: RePEc:plo:pone00:0263915
    DOI: 10.1371/journal.pone.0263915
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    2. Aujla, Navneet & Frost, Helen & Guthrie, Bruce & Hanratty, Barbara & Kaner, Eileen & O'Donnell, Amy & Ogden, Margaret E. & Pain, Helen G. & Shenkin, Susan D. & Mercer, Stewart W., 2023. "A comparative overview of health and social care policy for older people in England and Scotland, United Kingdom (UK)," Health Policy, Elsevier, vol. 132(C).
    3. 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.
    4. Yang, Ping & Lv, Yanqin & Chen, Xiaodan & Lv, Juan, 2024. "Digital finance, natural resource constraints and firms' low-carbon behavior: Evidence from listed companies," Resources Policy, Elsevier, vol. 89(C).
    5. Shang, Rui, 2023. "Divide or dividend: How digital finance impacts educational equality," Finance Research Letters, Elsevier, vol. 55(PA).
    6. Li Chen & Yuanbo Zhang, 2023. "Does the Development of the Digital Economy Promote Common Prosperity?—Analysis Based on 284 Cities in China," Sustainability, MDPI, vol. 15(5), pages 1-16, March.
    7. Zhang, Yunhui & Zhao, Wei, 2024. "Social capital's role in mitigating economic vulnerability: Understanding the impact of income disparities on farmers' livelihoods," World Development, Elsevier, vol. 177(C).
    8. 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).
    9. Luo, Haotian & Hu, Qing, 2024. "A re-examination of the influence of human capital on urban-rural income gap in China: College enrollment expansion, digital economy and spatial spillover," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 494-519.

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