Analysis of the Impact of Digital Inclusive Finance on the Consumption Gap between Urban and Rural Residents

Danjie Zhao

doi:10.6981/FEM.202510_6(10).0006

Authors

Danjie Zhao

DOI:

https://doi.org/10.6981/FEM.202510_6(10).0006

Keywords:

Digital Financial Inclusion; Urban-Rural Consumption Gap; Fixed Effects Panel Model; Liquidity Constraints.

Abstract

Rural revitalization is a key aspect of China's work. To decrease the disparity between urban and rural areas, to raise the peasants' income and consume level is in accordance with the present developing tendency of our country, and is conducive to social peace and stability and economic stability. As an emerging product of the Internet era, digital inclusive finance is beneficial for rural residents to access convenient financial services, stimulate their consumption potential, and effectively narrow the urban-rural consumption gap. In this thesis, we make a empirical study on the influence of digital inclusive financial on the urban-rural consumer difference by means of the Fixed-Effect Panel Model of Jiangsu Province. And it is concluded that digital inclusive finance can significantly reduce the urban-rural consumption gap. This conclusion is still valid after the robustness test of replacing the explained variable. Next, an analysis of the impact path was conducted, using the payment, credit, and insurance businesses in digital inclusive finance to replace the digital inclusive finance index for regression. The conclusion was drawn that digital inclusive finance reduces the consumption gap between urban and rural areas by promoting payment convenience, easy access to credit, and insurance protection. It was found that payment has the greatest impact on narrowing the urban-rural consumption gap and plays the largest role in the three transmission paths. Finally, a heterogeneity analysis was conducted between regions, dividing 13 prefecture level cities in Jiangsu Province into southern, central, and northern regions. Then, a group regression analysis was conducted. Moreover, we have discovered that the effect of DFI on the urban-rural consumer disparity is not homogeneous in geography, specifically reflected in its greater impact on underdeveloped regions than on developed regions. Finally, based on the above research conclusions, corresponding policy recommendations are proposed.

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