The impact of digital financial usage on resident’s income inequality in China: An empirical analysis based on CHFS data

Abstract

This study investigates the relationship between digital financial use and resident’s income inequality based on 2019 CHFS data. We argue that digital finance usage impacts resident’s income inequality both directly and indirectly. To examine the impact of digital financial use on resident’s income inequality and explore transmission mechanisms, including differences across regions, occupations, work types, and education levels, we employ ordinary least squares. Our results reveal that digital payments, digital money management, digital funds, and credit card usage have a positive mitigating effect on resident’s income inequality. Digital financial services have a significant positive impact on resident’s income inequality in southern, northern, coastal, and inland regions. Among purely agricultural farmers, digital payments, digital money management, and credit cards' effects are more pronounced than purely non-agricultural farmers. The use of digital financial also reduces resident’s income inequality among different work types, including institutional, state-owned, self-employed, and private enterprise. Family entrepreneurship, entrepreneurial frequency, and working outside the home are important channels through which digital financial services mitigate resident’s income inequality. Digital payments and credit cards reduce resident’s wage income inequality, while digital money management and digital funds are effective in reducing resident’s property income inequality.