Does Inclusive Finance Alleviate The Negative Effects Of Income Risks On Household Consumption?

Under the new development pattern of dual circulation,it is increasingly important to promote the growth of residents’ consumption demand by smoothing the domestic circulation.An important part of unblocking the domestic cycle is to open up the blocking points of residents’ consumption in order to finally release the consumption demand of residents.Among them,rising income risk is an important factor leading households to increase precautionary savings and reduce consumption demand(Leland,1968).Therefore,reducing the inhibitory effect of income risk on household consumption is an important way to promote household consumption growth.From the relevant research on consumer insurance,households generally smooth consumption through formal or informal risk sharing methods.Formal mechanisms include insurance participation,financial market lending,etc.;informal mechanisms are mainly based on family ways such as mutual help among members of a social network.With the rapid development of Inclusive Finance in China in recent years,inclusive finance has played a great role in expanding the scope of financial credit services,insurance services and promoting residents’ productive activities.It has really promoted the "inclusive" work of sharing financial services among the whole people,and may also improve the risk response mechanism of residents’ families to a certain extent,and improved the ability of residents to smooth household consumption.Existing studies pay more attention to the direct impact of Inclusive Finance on improving residents’ family economic behavior,including the promotion of residents’ consumption;However,there are few studies on whether inclusive finance can smooth residents’ consumption and reduce the impact of uncertainty.Based on the data of China Household Finance Survey(CHFS)in 2015,this paper constructs the inclusive finance index at the family level by using factor analysis to investigate whether inclusive finance can help alleviate the inhibitory effect of income risk on Residents’ consumption.The empirical test results show that inclusive finance can significantly alleviate the inhibitory effect of income risk on Residents’ consumption.Through endogenous treatment and relevant robustness test,the conclusions are still consistent,and almost all sub indicators of Inclusive Finance show significant mitigation effect;In addition,from the perspective of sub item consumption expenditure,the mitigation effect of Inclusive Finance is more significant in higherlevel consumption expenditure such as entertainment and education.The mechanism analysis shows that inclusive finance mainly realizes the mitigation effect by reducing family liquidity constraints,improving family risk management ability and expanding family social network.Heterogeneity analysis found that the "inclusiveness" of Inclusive Finance alleviates the inhibitory effect of income risk on consumption of households in underdeveloped areas and low-income households to a greater extent,but the mitigation effect of Inclusive Finance will be limited by the level of individual financial literacy and social trust.Therefore,while vigorously promoting the development of Inclusive Finance,the state should also strive to improve the national financial literacy,and take measures to enhance the social trust of residents,so as to give better play to the economic effect of Inclusive Finance,and further open the blocking point for unblocking the domestic circulation and promoting the growth of residents’ consumption.