MICRO-EVIDENCE OF CHINA THE RELATIONSHIP BETWEEN INTERNET PROFICIENCY, DIGITAL FINANCIAL AND RURAL HOUSEHOLD EXPENDITURE

Abstract

Digital financial inclusion is becoming widely acknowledged as one of the tools to ensure socioeconomic sustainability and minimize rural-urban differences. The study has used the micro data of Peking University Digital Financial Inclusion Index comprised of 11,596 rural families in 28 Chinese provinces to test the effect of digital financial inclusion on rural family spending and upgrading with the focus on the constraining effects of Internet skills. The methodology has employed ordinary least squares, Quantile regression, 2SLS methods to address heterogeneity and Endogeneity. The results reveal that the digital financial inclusion has a substantial positive effect on the rural household consumption and is found to drive consumption. Digital financial inclusion has positive consumption impacts, which are enhanced by internet skills in low-income, low-consumption and older families and reduce the digital divide. Nonetheless, the Internet skills do not directly enhance consumption upgrading. Digital financial inclusion increases rural consumption by improving credit, household income, and financial market participation, which are boosted by Internet skills. The findings suggested that both inclusive financial policy development and digital capability development are required to achieve sustainable and equitable rural development.