The Impact Of Digital Inclusive Finance On Income Inequality In China

Achieving common prosperity is the fundamental goal of socialism,and effectively alleviating residents’ income inequality in the process of high-quality economic development is an important task currently faced.Income inequality of residents in China is reflected in two aspects: large horizontal income gap and low vertical intergenerational income mobility.The financial market is a key link in the optimal allocation of resources,and the significant positive effect of financial market development on economic growth and reduction of income inequality has been supported by foreign studies.However,due to the uneven development of financial markets in China,urban-rural and regional differences exist,the role of financial markets in promoting common wealth is still relatively limited.The emergence and widespread use of digital finance has broken through the constraints of the traditional financial market in terms of space and time.Digital financial services,represented by online banking and mobile banking,are becoming increasingly popular,and such digital financial services have broadened the scope of traditional inclusive finance and promoted the development of inclusive finance with their advantages of low cost and convenience,known as digital inclusive finance.We explore the impact of digital inclusive finance on income inequality from two perspectives: household income gap and intergenerational income mobility.The income gap perspective,which is divided into two parts: in the first part,the impact of digital inclusive finance on household net income is examined,and the impact of digital inclusive finance on household income at different income levels is explored through quantile regression.The results show that it helps to raise household income and has a greater positive impact on low-income households.In addition,there is urban-rural and regional heterogeneity in the impact of digital inclusive finance on household income,with a more significant impact on net household income in urban and coastal areas.In the second part,based on the first part of the study,the Gini coefficient is used to further verify whether digital inclusive finance affects the household income gap,and to analyse in depth whether there is regional heterogeneity in this effect.The results show that digital inclusive finance helps to reduce the household income gap and there is regional heterogeneity,mainly affecting the household income gap within each district and county in the coastal region.Heterogeneous results may be due to the fact that residents in rural and non-coastal areas have relatively lower education and more severe poverty,and digital finance inadvertently generates certain educational and technological thresholds,making digital financial services inaccessible to this part of the population.From the perspective of intergenerational income mobility,the impact of digital inclusive finance on intergenerational income mobility is also studied based on CFPS and digital inclusive finance index to explore whether digital inclusive finance is conducive to alleviating income inequality from a dynamic perspective.The empirical results show that the development of digital inclusive finance promotes the intergenerational income mobility of Chinese residents,and the impact is more significant in rural areas/non-coastal regions than in urban/coastal regions.Second,in terms of impact mechanisms,the development of digital inclusive finance significantly increases the educational inputs of residents in rural and non-coastal areas,resulting in more educational opportunities.Finally,this paper investigates the magnitude of the development of each dimension of digital inclusive finance on intergenerational income mobility in rural and non-coastal areas,and finds that the current breadth of digital inclusive finance coverage is the main driver of intergenerational income mobility.Based on the above conclusions,it is recommended that the government should strengthen the construction of digital inclusive finance infrastructure in rural and noncoastal areas;increase investment in education to promote educational equity;vigorously promote digital inclusive finance to improve the financial literacy of the general public,especially people in rural and non-coastal areas;and improve the regulations related to digital inclusive finance,strengthen supervision,and promote its healthy development.