Research On The Threshold Effect Of Digital Financial Inclusion On The Income Gap Between Urban And Rural Residents

The Fifth Plenary session of the 20 th CPC Central Committee emphasized the goal of "common prosperity",and pointed out that the main problem to be solved at this stage is the income gap between urban and rural residents.How to effectively reduce the income gap between urban and rural residents has become the current main goal.Since the Third Plenary Session of the Eleventh Central Committee proposed the reform and opening up,China’s economy and finance have achieved high-speed and high-quality development,and the GDP has increased from 367.88 billion yuan in 1978 to 114367 billion yuan in 2021.The living standard of residents has been significantly improved,but there still exists the problem of large income gap between urban and rural areas.The dual characteristics of urban and rural areas are very obvious,which seriously affects social equity.Internet-based Inclusive Finance provides a new way to solve this problem,with the aid of computer processing large data,rapid information interaction,etc.,for financial services to expand scope,efficiency,compared with the traditional financial,Digital Financial Inclusion is more convenient,lower cost,more safety,improve the financial inclusion,It makes it convenient for more vulnerable groups to obtain financial products,better satisfy their financial needs,and enables urban and rural residents to enjoy almost the same financial rights and interests,so as to improve the level of social welfare and help reduce the income gap between urban and rural residents.But,what can’t be ignored is that the rural education level and economic development level is far less than urban areas,residents’ financial literacy can not meet the requirements,with the Internet as a carrier of Inclusive Finance promoting in the early stages of the rural areas,could be affected by a variety of restrictions,making Inclusive Finance impact on the urban and rural residents income gap exists nonlinear.This nonlinear effect can be characterized by the threshold model,but it is unclear whether China’s Digital Financial Inclusion has crossed the threshold.If it has crossed the threshold,what is the different relationship between the two after crossing the threshold? Does this effect vary across regions? This paper will discuss these problems one by one.The main work and conclusions of this paper include the following aspects:(1)Theoretical analysis of the impact mechanism of Digital Financial Inclusion on the income gap between urban and rural residents.1.Digital Financial Inclusion has expanded the financial scope and optimized the financial environment,and indirectly affected the income level of rural residents through the "trickle-down effect".2.Digital Financial Inclusion has further lowered the financial threshold,met the needs of the "long tail" market groups,and boosted the incomes of low-income groups.3.Digital Financial Inclusion reduces the income gap between urban and rural residents by reducing information asymmetry and moral hazard and weakening financial repression.4.Digital Financial Inclusion mitigated the uneven effect of financial development within various regions.(2)Based on the panel data of 286 prefecture-level cities in China from 2011 to 2019,the threshold effect of Digital Financial Inclusion on the income gap between urban and rural residents was tested.A bidirectional fixed model was first established to preliminarily determine the correlation between the two.At the same time,the coefficient of each control variable was confirmed to be within a reasonable range,and the Internet penetration rate was used as an instrumental variable to solve the endogeneity problem.Then,the panel threshold model is established with Digital Financial Inclusion as the threshold variable,and the robustness test is carried out to characterize the nonlinear relationship between the two.Further mechanism analysis proves that Digital Financial Inclusion mainly affects the disposable income of rural residents,leading to changes in the income gap between urban and rural residents,and has a greater impact on lowincome areas.(3)According to the structural heterogeneity,Digital Financial Inclusion is divided into digitalization degree,coverage breadth and use depth.The panel threshold model is established for the dimension with nonlinear influence,and the double fixed effect model is established for the area without nonlinear influence.The findings are as follows: First,the coverage breadth has a nonlinear trend of first widening,then no impact,and then decreasing the income gap of urban and rural residents;the use depth has a nonlinear trend of first narrowing and then narrowing the income gap of urban and rural residents;and the degree of digitalization has a trend of first expanding and then narrowing.(4)This paper verifies the regional heterogeneity of Digital Financial Inclusion on the income gap between urban and rural residents from four perspectives.According to geographical location,it is divided into east,central,west,South,north,inland and coastal areas,and whether it is located in five major urban agglomerations,and the model is established by classification.The findings are as follows: First,Digital Financial Inclusion has a significant positive impact on the central and western regions,while it has no impact on the eastern region.The possible reason is that the eastern region is more developed and has a high urbanization rate,and the exclusion effect is lower in rural areas.Further research shows that for the eastern region,the use depth will always expand the income gap between urban and rural residents,while the coverage breadth has a convergence effect,but the reduction effect is weakened after crossing the threshold,and the degree of digitalization has a trend of expanding first and then narrowing.For the central region,the coverage breadth has the effect of shrinking,the use depth and the degree of digitalization have the effect of expanding first and then shrinking.For the western region,only when the degree of digitalization reaches a certain value will it have a shrinking effect,and other digitalization dimensions have no significant impact.Second,there is a nonlinear effect of promoting the urban-rural income gap in the southern region,while the northern region is not significant at the significance level of 5%.Third,Digital Financial Inclusion in inland areas has convergence effect only after crossing the threshold,while coastal areas fail the significance test.Fourth,it is found that Digital Financial Inclusion has a greater convergence effect on the income difference between urban and rural residents in non-urban agglomeration areas.Finally,based on the above conclusions,this paper believes that it is necessary to accelerate the development process of Digital Financial Inclusion,strengthen the popularization of Digital Financial Inclusion in rural areas,innovate digital financial products and services,develop Digital Financial Inclusion according to local conditions,and achieve common prosperity.