IDEAS home Printed from https://ideas.repec.org/a/spr/soinre/v170y2023i3d10.1007_s11205-023-03245-z.html
   My bibliography  Save this article

Digital Financial Inclusion, Income Inequality, and Vulnerability to Relative Poverty

Author

Listed:
  • Lijin Liu

    (Renmin University of China)

  • Lu Guo

    (Jiangxi University of Finance and Economics)

Abstract

Governing relative poverty is an indispensable part of achieving inclusive growth. Using data from the China Household Financial Survey, we scientifically investigate the impact of China's development of digital financial inclusion on household vulnerability to relative poverty. The research results show that the development of digital financial inclusion can significantly alleviate the vulnerability to relative poverty of households, and effectively prevent families from falling into a state of relative poverty in the future. The results of the heterogeneity analysis show that the effect of digital financial inclusion in mitigating vulnerability to relative poverty is greater in households with high population dependency ratios, digital tools, and household head education levels. In parallel, there are also significant regional differences in digital finance in mitigating the relative vulnerability of households. Further mechanism research found that the development of digital finance inclusion mainly reduces the probability of families falling into relative poverty in the future by alleviating income inequality, thereby improving the health status of family members, family development-oriented consumption, and family happiness.

Suggested Citation

  • Lijin Liu & Lu Guo, 2023. "Digital Financial Inclusion, Income Inequality, and Vulnerability to Relative Poverty," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 170(3), pages 1155-1181, December.
  • Handle: RePEc:spr:soinre:v:170:y:2023:i:3:d:10.1007_s11205-023-03245-z
    DOI: 10.1007/s11205-023-03245-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11205-023-03245-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s11205-023-03245-z?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. Ichraf Ouechtati, 2020. "The Contribution of Financial Inclusion in Reducing Poverty and Income Inequality in Developing Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(9), pages 1051-1061.
    2. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    3. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
    4. McLeod, C.B. & Lavis, J.N. & Mustard, C.A. & Stoddart, G.L., 2003. "Income Inequality, Household Income, and Health Status in Canada: A Prospective Cohort Study," American Journal of Public Health, American Public Health Association, vol. 93(8), pages 1287-1293.
    5. Chaohua He & Hongyan Du, 2022. "Urbanization, inclusive finance and urban-rural income gap," Applied Economics Letters, Taylor & Francis Journals, vol. 29(8), pages 755-759, May.
    6. Vikrant Vig, 2013. "Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment," Journal of Finance, American Finance Association, vol. 68(3), pages 881-928, June.
    7. 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.
    8. Guibo Liu & Huimin Fang & Xiaoxian Gong & Feifei Wang, 2021. "Inclusive finance, industrial structure upgrading and farmers’ income: Empirical analysis based on provincial panel data in China," PLOS ONE, Public Library of Science, vol. 16(10), pages 1-24, October.
    9. Alkire, Sabina & Foster, James, 2011. "Counting and multidimensional poverty measurement," Journal of Public Economics, Elsevier, vol. 95(7), pages 476-487.
    10. Wilkinson, Richard G & Pickett, Kate E., 2006. "Income inequality and population health: A review and explanation of the evidence," Social Science & Medicine, Elsevier, vol. 62(7), pages 1768-1784, April.
    11. Zhang, Quanda & Awaworyi Churchill, Sefa, 2020. "Income inequality and subjective wellbeing: Panel data evidence from China," China Economic Review, Elsevier, vol. 60(C).
    12. 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.
    13. Janet Currie, 2009. "Healthy, Wealthy, and Wise: Socioeconomic Status, Poor Health in Childhood, and Human Capital Development," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 87-122, March.
    14. Sassi, Seifallah & Goaied, Mohamed, 2013. "Financial development, ICT diffusion and economic growth: Lessons from MENA region," Telecommunications Policy, Elsevier, vol. 37(4), pages 252-261.
    15. Sun, Yang & Tang, Xinwei, 2022. "The impact of digital inclusive finance on sustainable economic growth in China," Finance Research Letters, Elsevier, vol. 50(C).
    16. John Giles & Kyeongwon Yoo, 2007. "Precautionary Behavior, Migrant Networks, and Household Consumption Decisions: An Empirical Analysis Using Household Panel Data from Rural China," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 534-551, August.
    17. Cyn-Young Park & Rogelio Mercado, 2018. "Financial Inclusion, Poverty, And Income Inequality," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(01), pages 185-206, March.
    18. Chung Thanh Phan & Thang Tat Vo & Diem Thi Hong Vo, 2023. "Can microcredit reduce vulnerability to poverty? Evidence from rural Vietnam," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 608-629, February.
    19. Abhijit Banerjee & Emily Breza & Esther Duflo & Cynthia Kinnan, 2019. "Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?," Discussion Papers Series, Department of Economics, Tufts University 0832, Department of Economics, Tufts University.
    20. Wildman, John, 2003. "Modelling health, income and income inequality: the impact of income inequality on health and health inequality," Journal of Health Economics, Elsevier, vol. 22(4), pages 521-538, July.
    21. Ichraf Ouechtati, 2020. "The Contribution of Financial Inclusion in Reducing Poverty and Income Inequality in Developing Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(9), pages 1051-1061, September.
    22. Jhon Edwar Hernández & Blanca Zuluaga, 2022. "Vulnerability to Multidimensional Poverty: An Application to Colombian Households," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 164(1), pages 345-371, November.
    23. Jin, Ye & Li, Hongbin & Wu, Binzhen, 2011. "Income inequality, consumption, and social-status seeking," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 191-204, June.
    24. M. D. R. Evans & Jonathan Kelley & S. M. C. Kelley & C. G. E. Kelley, 2019. "Rising Income Inequality During the Great Recession Had No Impact on Subjective Wellbeing in Europe, 2003–2012," Journal of Happiness Studies, Springer, vol. 20(1), pages 203-228, January.
    25. Hongbo Zhao & Xiao Zheng & Lin Yang, 2022. "Does Digital Inclusive Finance Narrow the Urban-Rural Income Gap through Primary Distribution and Redistribution?," Sustainability, MDPI, vol. 14(4), pages 1-19, February.
    26. Deng, Jiapin & Liu, Yanchu, 2022. "Does digital finance reduce the employment in the finance industry? Evidence from China," Finance Research Letters, Elsevier, vol. 48(C).
    27. Jing He & Qinghai Li, 2020. "Can online social interaction improve the digital finance participation of rural households?," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 12(2), pages 295-313, April.
    28. Ozili, Peterson Kitakogelu, 2018. "Impact of Digital Finance on Financial Inclusion and Stability," MPRA Paper 84771, University Library of Munich, Germany.
    29. 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.
    30. Russell Smyth & Xiaolei Qian, 2008. "Inequality and Happiness in Urban China," Economics Bulletin, AccessEcon, vol. 4(24), pages 1-10.
    31. 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.
    32. Xun Zhang & Ying Tan & Zonghui Hu & Chen Wang & Guanghua Wan, 2020. "The Trickle‐down Effect of Fintech Development: From the Perspective of Urbanization," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(1), pages 23-40, January.
    33. Xinhua Gu & Yang Zhang & Xiao Chang, 2017. "The role of financial systems for cross-country differences in the link between income and consumption inequality," Applied Economics, Taylor & Francis Journals, vol. 49(24), pages 2365-2378, May.
    34. Li, Linyang, 2018. "Financial inclusion and poverty: The role of relative income," China Economic Review, Elsevier, vol. 52(C), pages 165-191.
    35. Naishu Yu & Yanzhe Wang, 2021. "Can Digital Inclusive Finance Narrow the Chinese Urban–Rural Income Gap? The Perspective of the Regional Urban–Rural Income Structure," Sustainability, MDPI, vol. 13(11), pages 1-18, June.
    36. Isaac Koomson & Renato A. Villano & David Hadley, 2020. "Effect of Financial Inclusion on Poverty and Vulnerability to Poverty: Evidence Using a Multidimensional Measure of Financial Inclusion," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(2), pages 613-639, June.
    37. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 261-294.
    38. Boou Chen & Chunkai Zhao, 2021. "Poverty reduction in rural China: Does the digital finance matter?," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-27, December.
    39. Wang, Jinxian & Wang, Chen & Li, Sihao & Luo, Zhi, 2021. "Measurement of relative welfare poverty and its impact on happiness in China: Evidence from CGSS," China Economic Review, Elsevier, vol. 69(C).
    40. Muhammad Masood Azeem & Amin W. Mugera & Steven Schilizzi, 2018. "Vulnerability to Multi-Dimensional Poverty: An Empirical Comparison of Alternative Measurement Approaches," Journal of Development Studies, Taylor & Francis Journals, vol. 54(9), pages 1612-1636, September.
    41. Pickett, Kate E. & Wilkinson, Richard G., 2015. "Income inequality and health: A causal review," Social Science & Medicine, Elsevier, vol. 128(C), pages 316-326.
    42. repec:ebl:ecbull:v:4:y:2008:i:24:p:1-10 is not listed on IDEAS
    43. Jing He & Qinghai Li, 2020. "Can online social interaction improve the digital finance participation of rural households?," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 12(2), pages 295-313, April.
    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. Peterson K. Ozili & David Mhlanga, 2024. "Why is financial inclusion so popular? An analysis of development buzzwords," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 231-253, January.
    2. 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).
    3. Pengju Liu & Yitong Zhang & Shengqi Zhou, 2023. "Has Digital Financial Inclusion Narrowed the Urban–Rural Income Gap? A Study of the Spatial Influence Mechanism Based on Data from China," Sustainability, MDPI, vol. 15(4), pages 1-20, February.
    4. Zhang, Cheng & Zhu, Yuyao & Zhang, Limin, 2024. "Effect of digital inclusive finance on common prosperity and the underlying mechanisms," International Review of Financial Analysis, Elsevier, vol. 91(C).
    5. Wang, Yunsong & Jiang, Aiqing & Zhang, Songlin & Chen, Weihong, 2024. "Traditional finance, digital finance, and financial efficiency: An empirical analysis based on 19 urban agglomerations in China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    6. Zhao, Chunkai & Wang, Yuhang & Ge, Zhenyu, 2023. "Is digital finance environmentally friendly in China? Evidence from shared-bike trips," Transport Policy, Elsevier, vol. 138(C), pages 129-143.
    7. Fang Wang & Xixi Zhang & Chuwen Ye & Qihua Cai, 2024. "The Household Multidimensional Poverty Reduction Effects of Digital Financial Inclusion: A Financial Environment Perspective," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 172(1), pages 313-345, March.
    8. Xin, Xinyi & Zhang, Anquan & Liu, Lu, 2024. "Study on the influence of Internet finance on urban household savings rate: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 45-61.
    9. Guangshun Xu & Lin Feng & Wenzheng Wang & Qiaohui Liang, 2024. "Digital Financial Literacy and Rural Income Inequality," SAGE Open, , vol. 14(3), pages 21582440241, September.
    10. 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.
    11. David Damiyano & Stephen Mago, 2023. "An Analysis of the Impact of Financial Inclusion on Poverty and Development: Case of SACU Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 13(6), pages 141-147, November.
    12. 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.
    13. Guillermo Boitano & Deybi Franco Abanto, 2020. "Challenges of financial inclusion policies in Peru," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 12(1), pages 89-117, June.
    14. Hua Guo & Fan Gu & Yanling Peng & Xin Deng & Lili Guo, 2022. "Does Digital Inclusive Finance Effectively Promote Agricultural Green Development?—A Case Study of China," IJERPH, MDPI, vol. 19(12), pages 1-17, June.
    15. Boou Chen & Chunkai Zhao, 2021. "Poverty reduction in rural China: Does the digital finance matter?," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-27, December.
    16. Chunkai Zhao & Xing Li & Jianfeng Yan, 2024. "The effect of digital finance on Residents' happiness: the case of mobile payments in China," Electronic Commerce Research, Springer, vol. 24(1), pages 69-104, March.
    17. Isaac Appiah-Otoo & Na Song, 2021. "The Impact of Fintech on Poverty Reduction: Evidence from China," Sustainability, MDPI, vol. 13(9), pages 1-13, May.
    18. Peng Peng & Hui Mao, 2023. "The Effect of Digital Financial Inclusion on Relative Poverty Among Urban Households: A Case Study on China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 165(2), pages 377-407, January.
    19. Lin Tai & Fu Xiaopeng & Gong Ting & Xu Xinpeng & Stavros Sindakis & Gazal Showkat, 2024. "Assessing the Relationship Between Digital Inclusive Finance and the Well-Being of Elderly Individuals: A Study of Life Satisfaction," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 9597-9628, June.
    20. 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.

    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:spr:soinre:v:170:y:2023:i:3:d:10.1007_s11205-023-03245-z. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.