Has Digital Financial Inclusion Narrowed the Urban-Rural Income Gap: The Role of Entrepreneurship in China

Abstract

The combination of digital technology and finance has brought about a new development model for financial inclusion. What impact will it have on the current imbalance in the distribution of financial resources and the urban-rural income gap in China? To answer this question, this paper uses relevant data from 2014–2018 to study the impact of digital inclusive finance on the urban-rural income gap from the theory of financial exclusion, and analyzes the transmission of digital inclusive finance through alleviating financial exclusion, widening financing channels and helping residents with entrepreneurial spirit to start their own businesses, thus increasing jobs, raising the income of rural residents and reducing the urban-rural income gap. The conclusions are as follows: (1) digital inclusive finance can significantly converge the urban-rural income gap; (2) among the dimensions of digital inclusive finance, only the breadth of coverage can significantly reduce the urban-rural income gap, while the effects of depth of use and digitalization are not significant; (3) digital inclusive finance can alleviate the urban-rural income gap through the transmission mechanism of promoting residents’ entrepreneurship; (4) the worse the regional economic development and education, the better the effect of digital inclusive finance on the urban-rural income gap. This paper combines the above results to propose corresponding policy recommendations.

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