Quantifying change: The impact of digital financial inclusion across income quantiles in China

Abstract

This study examines the impact of digital financial inclusion on household income in China employing a novel approach: a spatial dynamic panel quantile model with interactive fixed effects. Utilizing data from the China Family Panel Studies spanning 2010 to 2020, we analyze how digital financial inclusion influences income across various quantiles. Our results indicate that digital financial inclusion significantly boosts household income, with the most substantial effects observed at the 25 % household income quantile—where a 1 % increase in the digital financial inclusion index corresponds to a 0.12 % rise in household income. Further analysis reveals that while lower quantiles primarily benefit from increases in labor income, higher quantiles experience greater gains from property income, highlighting a potential new form of inequality in the digital era. This paper contributes significantly to the literature by accurately estimating the impact of digital financial inclusion on household income and delineating the mechanisms across various quantiles.