Measuring provincial digital finance development efficiency based on stochastic frontier model

Abstract

Effective development of digital finance is vital to closing the regional economic disparities. This study aims at investigating the efficiency of digital finance development in China and its implications for closing regional economic disparities. Using the stochastic frontier model, we estimate the development efficiency of digital finance in 31 provinces in China from 2011 to 2020, and reveal their characteristics of temporal evolution and spatial distribution. The results show that the efficiency of digital finance development in each province shows a tendency to increase quickly first and then slowly decline. The provinces with a higher level of digital finance development always have higher development efficiency at the beginning of the sample period, which then declines rapidly after reaching the maximum, and even less than the national average value at the end of the period, with significant regional disparities observed. The provinces with a higher level of digital finance development always have higher development efficiency at the beginning of the sample period, which then declines rapidly after reaching the maximum, and even less than the national average value at the end of the period. The imbalance of development efficiency among different provinces is increasing, and the potential for development efficiency in the central and western regions is relatively greater. These findings have important implications for promoting high-quality economic development and common prosperity in China. In the future, we should continually prevent the development efficiency of digital finance to decline rapidly in all provinces (especially in the eastern region), and strive constantly to bridge the gap of development efficiency among different province, so as to provide a better surrounding for promoting high-quality economic development and common prosperity.