Does Digital Inclusive Finance Narrow the Urban-Rural Income Gap through Primary Distribution and Redistribution?

Excessive income gap (IG) between urban and rural areas harms the quality of economic development, and imbalanced primary distribution (PD) as well as redistribution (RD) are considered to be the main factors contributing to the urban-rural IG. Does digital Inclusive Finance (DIF) affect the urban-rural IG through PD and RD? This paper empirically studies the impact of digital inclusive finance on Chinese urban-rural IG from the perspectives of PD and RD respectively, through updated and comprehensive provincial data, using the method of mediating effect. The results show that DIF narrowed China's urban-rural IG with regional differences. Meanwhile, DIF also narrowed the urban-rural IGs in PD and RD, both with regional heterogeneity. Moreover, narrowing the urban-rural IG of PD exerted a mediating effect on the general urban-rural IG, while narrowing the urban-rural IG of RD did not. The results are helpful for DIF to better narrow urban-rural IG. Therefore, countermeasures are put forward for DIF to apply from the perspectives of PD and RD.

Automated summary

This paper empirically studies the impact of digital inclusive finance on the urban-rural income gap in China. The results show that digital inclusive finance has a narrowing effect on the income gap, both in terms of primary distribution and redistribution. Specifically, narrowing the income gap in primary distribution has a mediating effect on the overall urban-rural income gap, while narrowing the income gap in redistribution does not. Countermeasures are proposed for digital inclusive finance based on these findings.