Financial Market Participation under the Digital Divide

An Empirical Study Based on CHFS Data

Abstract

With the advent of the Internet age, the era of digital economy is drawing closer to us, and it has brought significant changes to our lives, providing us with many conveniences. However, it has also brought about the impact of wealth disparity, commonly known as the digital divide, which refers to the polarization of poverty and affluence caused by the disparities in the access and application of network technology. Using the 2017 China Household Finance Survey (CHFS) data, this study investigates the extent to which the digital divide affects household participation in financial markets. The findings suggest that the digital divide significantly reduces household participation in financial markets. Furthermore, this study divides the financial market into low-risk and high-risk markets and explores the impact of the digital divide on each of them. It is found that the digital divide significantly inhibits participation in both low-risk and high-risk financial markets, with a more pronounced impact on the latter. Additionally, this study explores the mechanism through which the digital divide affects participation in financial markets, revealing that the digital divide reduces household income and consequently decreases their participation in financial markets. This study provides insights into the relationship between the digital divide and household participation in financial markets, sheds light on the negative impacts of the digital divide, and offers useful information for households in making decisions regarding participation in financial markets.