Digital Inclusive Finance And Income Inequality

With the rapid economic development and profound social transformation,Chinese residents’ income have increased significantly,meanwhile the problem of income distribution inequality urgently requires solutions.From 2011 to 2020,China’s income Gini coefficient has been maintained at a high level.The large income distribution gap is not conducive to the realization of common prosperity.With the rapid development of Digital Inclusive Finance,more people can obtain various financial services through more convenient,more efficient and lower cost channels.Relying on financial services,lowincome people can obtain financial support in employment,entrepreneurship,production and life,so as to improve their income and help alleviate income inequality.Based on this,this thesis focuses on the impact of Digital Inclusive Finance on income inequality.This thesis makes an empirical analysis using a range of data sources,including the China Household Finance survey data of 2013,2016,2017 and 2019,the Peking University Digital Inclusive Finance index of 2011-2020,and urban economic data.Firstly,based on household level data of CHFS,this thesis manually calculates China’s overall and regional income inequality indicators to analyze China’s income inequality in detail.Secondly,by matching urban level income inequality index calculated from household micro data and the Peking University Digital Inclusive Finance index,this thesis obtains the four-year panel data of 157 cities.Based on the data the thesis empirically analyzes the relationship between income inequality and Digital Inclusive Finance through fixed effect model and finds that the development of Digital Inclusive Finance will significantly reduce income inequality.Thirdly,in order to solve the endogenous problem,this thesis adopts IV approach.Further,the thesis conducts the robust test by replacing the explained variable to maximum revenue share and key explanatory variable to Fintech index.The empirical results of endogenous test and robustness test support the benchmark conclusion.In order to explore how digital inclusive finance can reduce income inequality,this paper constructs indicators such as regional digital divide,regional credit access and regional employment level based on household micro data to test the mechanism.The mechanism analysis shows that digital inclusive finance can improve income inequality by bridging the digital divide,improving access to formal credit and promoting residents’ employment.The heterogeneity analysis shows that the effect of digital inclusive financial development on income inequality is significant in the eastern and western regions,but not in the central region.In further analysis,the effect of Digital Inclusive Finance on income inequality is more significant in areas with relatively high human capital and relatively high competition level of bank.The sub index analysis shows that it’s the improvement of the use depth of digital finance and the digitization of inclusive finance to have helped alleviate income inequality.In further discussion,this thesis uses entropy method to construct the common prosperity index and finds that digital inclusive finance can promote common prosperity.Based on the research conclusions,this thesis puts forward the following policy suggestions: First,continue to proceed Digital Inclusive Finance to promote fair income distribution and common prosperity;Second,ascertain keystones of development according to local conditions to maximize the efficiency of Digital Inclusive Finance;Third,improve residents’ digital skills and reduce the threshold for the use of digital products;Fourth,optimize the traditional financial structure to give full play to the advantages of Digital Inclusive Finance.