Can internet finance promote employment absorption by township enterprises in China?

Abstract

Township and village enterprises (TVEs) serve as the primary channel for employment, contributing to over 80 % of rural jobs in China. Internet finance, leveraging technological means, provides more convenient and flexible financing channels in expanding employment opportunities. Based on representative sampling survey data of Chinese township enterprises in 2016, this paper explores the impact of Internet finance adoption at the village level on labor employment within TVEs. We find that villages utilizing Internet finance exhibit an increase in the employment-absorbing capacity of TVEs. After addressing potential endogeneity issues through methods such as instrumental variables, the results remain robust. The alleviation of financing constraints and the promotion of business model innovation are key channels through which Internet finance drives employment absorption by TVEs. Further analysis reveals that the employment-driving effect of Internet finance is primarily concentrated among individuals with at least a high school education, fellow villagers or townsfolk, and is more prominent for contract workers rather than temporary workers. In addition, the promotional effect of Internet finance on employment in TVEs is more pronounced in villages with fewer financial service institutions and in midwest regions in China, highlighting the inclusiveness nature of Internet finance.