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The Impact of Digital Financial Inclusion on the Urban-Rural Income Gap in China

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DOI: 10.25236/etmhs.2022.124

Author(s)

Liangpeng Chen, Chaiwat Nimanussorinkul, Pathairat Pastpipatkul

Corresponding Author

Liangpeng Chen

Abstract

China is the second largest economic power in the world. The dual structure of urban and rural areas restricts the fair and reasonable allocation of financial resources, resulting in the problem of excessive income gap and affecting China's social equity. Due to the widespread application of the Internet, digital financial inclusion has risen rapidly and has become an important factor affecting my country's economic development. Digital inclusive finance relies on technological innovation of inclusive financial products and services, and has advantages in reducing costs, expanding the scope of financial services, and effectively controlling risks. On the basis of theory and status quo, this paper selects data from 30 provinces in my country, uses Theil index to measure the urban-rural income gap, and uses digital financial inclusion data from the Digital Finance Research Center of Peking University as explanatory variables. After the Hausman test, random or fixed effect models are used to analyze the impact of digital financial inclusion on the urban-rural income gap, and to explore the impact of different dimensions and economic zones. The research results show that the development of digital inclusive finance in China can significantly reduce the income gap between urban and rural areas; the development effects of digital inclusive finance in different dimensions are different; the effects of different economic zones are also different. Finally, in view of the different impacts of digital financial inclusion on the urban-rural income gap, this paper puts forward relevant suggestions for the government, regulators and financial institutions.

Keywords

digital inclusive finance, urban–rural income gap, panel data model