The Impact of China’s Digital Financial Inclusion on Urban-Rural Income Gap: Evidence from Panel Data Analysis

Abstract

Using panel data from 2016 to 2020, this empirical study examines how the urban-rural residents’ income divide in China is affected by digital financial inclusion. This paper investigates the association between the digital universal financial inclusion and the Thiel index, which gauges the income disparity in 31 provinces, using Stata16 software and a two-way fixed effects model. In this framework, this paper also look at the mediating role played by economic progress. The findings show that closing the income gap is significantly and favorably impacted by digital financial inclusion. In addition, this research discover that the per capita GDP of each area and the average amounts of years of schooling of the population over the age of 15 serve as significant mediating variables between digital financial inclusion and the income gap, although the urbanization rate does not. These results highlight the critical role that digital financial inclusion plays in encouraging inclusive growth, promoting balanced economic development, and minimizing regional differences in China.