Research On The Impact Of Digital Finance On Household Savings And Consumption

Under the background that China’s economic growth rate is gradually slowing down and the driving effect of investment and export on the economy is gradually weakening,the role of consumption on economic growth is increasingly important.The 14 th Five-Year Plan for National Economic and Social Development and the Outline of the 2035 Vision of the People’s Republic of China put forward the idea of "accelerating the building of a new development pattern in which the domestic great cycle plays a major role and both domestic and international cycles reinforce each other".The key to unimpeded the domestic great cycle lies in consumption.The report to the Party’s 20 th National Congress also pointed out that we should "strive to expand domestic demand and strengthen the fundamental role of consumption in economic development".Therefore,it is of great practical significance to study the problem of Chinese household savings and consumption.However,China’s household savings rate has remained high,severely depressing consumption.According to the World Bank,China’s household consumption rate was 39 percent in 2015,compared with the world average of 58 percent.Compared with other countries,China saves too much and spends too little.According to precautionary savings theory and liquidity constraint theory,the existence of uncertainty and liquidity constraint is an important reason for households to generate precautionary savings motivation.The empirical literature verifies this,and finds that Chinese households have a significant motivation to save preventatively,and the precautionary savings account for a considerable proportion of the total savings.In recent years,the rapid development of digital finance in China has brought profound changes to people’s way of production,life and governance.Relying on Internet information technology,digital finance has brought about financial product innovation and financial service innovation,which has profoundly affected household economic behavior.From the perspective of financing function,digital finance reduces financing threshold and financing cost,which helps to alleviate the liquidity constraints faced by households,especially those excluded by traditional finance.From the perspective of insurance functions,digital finance provides insurance purchase channels,improves the availability of insurance services,and helps promote family participation in insurance,thus reducing uncertainty.From the perspective of payment function,digital finance provides electronic payment methods and improves the convenience of family consumption.Taken together,digital finance could have an impact on household savings and consumption through functions such as financing,insurance and payments.However,combing through the existing literature,it is found that there are still deficiencies in the research on digital finance and household savings and consumption.Firstly,a small number of literatures have studied the impact of digital finance on household savings rate,and the results show that digital finance has a significant effect on reducing household savings rate.However,these literatures have the following shortcomings: first,they lack the research on digital finance and household savings from the perspective of precautionary savings motivation;second,they lack in-depth research and empirical test on the mechanism of digital finance reducing household savings rate;third,the content of digital finance is one-sided,only studying the impact of payment function of digital finance on household savings rate,without considering other functions.Secondly,although some literatures have paid attention to the impact of digital finance on household consumption,few scholars have studied the impact of digital finance on household consumption structure,especially the mechanism of digital finance promoting the upgrading of household consumption structure.Finally,existing literatures ignore background risks when studying the impact of digital finance on household consumption,and do not study whether digital finance can smooth consumption under the impact of background risks.Based on the existing literature,this paper studies the impact of digital finance on household savings and consumption.The main research contents and conclusions are as follows:(1)To study the impact of digital finance on household savings rate and precautionary saving motivation,in order to explore whether digital finance can reduce household precautionary saving motivation and release household consumption potential.Firstly,this chapter empirically studies the impact of digital finance on household savings rate,and the results show that digital finance has a significant effect on reducing household savings rate.It also explores the mechanism of preventive savings and finds that digital finance has a negative impact on household savings rate by easing liquidity constraints and reducing income uncertainty.The decrease of household savings rate is a manifestation of the weakening of precautionary saving motivation.This result indirectly indicates that digital finance weakens the precautionary saving motivation of households by easing liquidity constraints and reducing income uncertainty,and helps to release the potential of household consumption.In the heterogeneity analysis,this chapter verifies this again.Households are divided into motor units with savings and motor units without savings,and it is found that digital finance has a greater impact on the savings rate of households with savings motor units,which further proves that digital finance can weaken households’ motivation of precautionary saving.Then,this chapter directly empirically tests whether the use of digital finance significantly reduces the incentive of households to save preventatively.By referring to the existing literature,the coefficient of income uncertainty in the wealth income equation is used to measure the motivation of precautionary saving.Households are divided into two groups: those who use digital finance and those who do not,and the statistical test is made on the significance difference of the coefficient between the two groups.The empirical results show that the use of digital finance significantly reduces the motivation of precautionary saving of households.(2)Further research on the impact of digital finance on household consumption structure mainly includes two aspects: one is the impact of digital finance on different types of consumption;the other is the impact of digital finance on consumption upgrading.First of all,this chapter empirically studies the impact of digital finance on subsistence consumption,development enjoyment consumption and total consumption,and finds that digital finance has a significant promoting effect on different types of consumption.In addition to promoting consumption by easing liquidity constraints and reducing income uncertainty,this chapter finds that improving payment convenience is also a channel for digital finance to promote household consumption.Because digital finance has a significant promoting effect on subsistence consumption,development and enjoyment consumption and total consumption,and has the same influence direction on different types of consumption,it cannot be seen whether the influence of digital finance on consumption structure is good or bad.Then,this chapter further studies the impact of digital finance on household consumption structure by constructing consumption structure index.Based on the methods of existing literatures,the consumption structure is measured by the proportion of development enjoyment consumption in total consumption.According to Maslow’s hierarchy of needs theory,the increase of this index indicates that household consumption is upgrading.The empirical results show that digital finance has a significant promoting effect on household consumption upgrading,and its influence is realized through income effect and industrial structure upgrading effect.(3)Research background consumption effect of digital financial smoothing under risk impact.The purpose of this chapter is twofold.One is to explore the consumption smoothing effect of digital finance;the other is to further test whether the influence of digital finance on household consumption mentioned in the previous chapter is robust when considering background risks.Background risks,such as health risks and unemployment risks,are risks that households cannot diversify through their portfolios in the financial market,which will have a negative impact on household consumption.In this chapter,background risks are added into the model.Empirical results show that digital finance has a significant consumption smoothing effect under the impact of background risks,which can resist the negative impact of background risks on household consumption.After considering background risks,digital finance still has a significant promoting effect on household consumption,which further indicates the robustness of the conclusions in the previous chapters.Mechanism analysis shows that,when background risk shocks occur,digital finance improves households’ ability to withstand negative shocks by easing liquidity constraints and promoting households’ participation in insurance,so as to smooth consumption.Heterogeneity analysis shows that compared with households with low financial literacy,the consumption smoothing effect of digital finance is more significant in households with high financial literacy.Compared with households with high wealth,the consumption smoothing effect of digital finance is more significant in households with low wealth.The main innovations of this paper are reflected in the following aspects:(1)Discuss the impact of digital finance on household savings from the perspective of precautionary saving motivation.After the theory of precautionary saving was put forward,a large number of literatures have studied the motivation of precautionary saving,and the results show that there is a significant motivation of precautionary saving in Chinese households.Due to the relatively late emergence of digital finance,there are still few literatures on digital and family precautionary saving motivation.This paper explores the impact of digital finance on households’ precautionary savings motivation from two aspects.First,the channel of precautionary savings.Empirical results show that digital finance significantly reduces household savings rate by easing liquidity constraints and reducing income uncertainty,which indirectly indicates that digital finance helps to reduce households’ precautionary savings motivation.The second is to study whether households using digital finance and households not using digital finance show significant differences in precautionary saving motivation.This paper draws on the existing literature and uses the coefficient of income uncertainty in the wealth income ratio equation to represent the precautionary saving motivation,and empirically tests the difference of coefficient between the group using digital finance and the group not using digital finance.The results showed that the use of digital finance significantly reduced the incentive of precautionary saving.(2)Explore the mechanism of digital finance promoting the upgrading of household consumption structure,theoretically analyze the impact of digital finance on household consumption structure through income effect and industrial structure upgrading effect,and verify with empirical analysis.There are still few studies on the impact of digital finance on household consumption structure,and the research on its mechanism is relatively scarce.It is still unclear how digital finance affects household consumption structure.This paper theoretically analyzes that digital finance may promote the upgrading of consumption structure by increasing household income,or lead the upgrading of household consumption structure from the supply side by promoting the upgrading of industrial structure.The empirical study shows that digital finance can significantly promote the upgrading of household consumption structure,and its mechanism includes income effect and industrial structure upgrading effect.(3)Empirically tested the consumption effect of digital financial smoothing under background risk impact,and explored its mechanism.Background risk is a non-dispersible risk,which has a certain impact on household consumption.However,little research on the impact of digital finance on household consumption has considered background risk.This paper takes background risk into consideration and empirically studies the consumption effect and its mechanism of digital financial smoothing under the impact of background risk.The empirical results show that digital finance has a significant consumption smoothing effect,and its influence mechanism is that digital finance can smooth consumption by easing liquidity constraints and promoting household participation in insurance.