Digital Financial Inclusion and Rural Household Income in China: The Mediating Role of Economic Development and Regional Heterogeneity—Evidence from Provincial Panel Data

This study investigates the impact of digital financial inclusion on rural household income using panel data from 31 Chinese provinces (2011–2023). Employing a two-way fixed effects model, mediating effect analysis with bootstrap testing, and regional heterogeneity analysis, we find that digital financial inclusion significantly promotes rural income through the mediating channel of economic development, with the indirect effect accounting for 47.6% of the total effect. The income-enhancing effect exhibits pronounced regional heterogeneity: the western region shows the strongest effect, while the eastern region shows no significant effect. Robustness checks show a significant positive coefficient during normal economic periods and a larger, though statistically insignificant, point estimate in non-municipality provinces. Theoretically, this study integrates financial inclusion theory with endogenous growth theory and identifies economic development as a macro-level mediating mechanism. It also refines the financial late-mover advantage hypothesis by conditioning the marginal income effect on the level of traditional financial development rather than agricultural specialisation. Practically, the findings provide targeted policy guidance for developing countries, particularly in South Asia, on leveraging digital financial inclusion for inclusive rural development.