Financial inclusion, mental health, and energy poverty: Evidence from China

Abstract

Alleviating energy poverty (EP) is crucial for advancing energy justice. This study tests the impact of financial inclusion on EP and finds the important mechanistic role of mental health in it. We use the data from the 2014–2018 China Family Panel Studies and the probit model to examine financial inclusion's influence on household EP. The empirical results reveal that financial inclusion significantly alleviates household EP; this conclusion holds after conducting a series of robustness and endogeneity tests. Specifically, we find that mental health is an important mechanism and that financial inclusion alleviates EP by improving the mental health of households. Moreover, we observe that the influence of financial inclusion on EP is heterogeneous at household levels; financial inclusion effectively prevents EP for households with low savings and few financial assets, as well as for those starting a business. This study offers a novel perspective, exploring the manner of eradicating EP and promoting the formulation of proper energy transition policies.