Broadband infrastructure and digital financial inclusion in rural China

Abstract

This paper examines the relationship between the large-scale construction of broadband infrastructure and digital financial inclusion in rural China. To make causal inferences, we exploit a quasi-natural experiment and use a difference-in-differences identification strategy with a panel dataset of Chinese counties from 2014 to 2018. The results show that broadband infrastructure significantly contributes to digital financial inclusion. Furthermore, we distinguish between two dimensions of digital inclusion, namely, coverage and usage. We find that while broadband infrastructure promotes the coverage dimension, its effect on the usage dimension is limited. In addition, the effect of broadband infrastructure on digital financial inclusion in the usage dimension is larger in areas with higher levels of human capital, higher levels of social capital, and higher penetrations of bank branches. Accounting for these moderators is important to fully harness the potential of broadband infrastructure for financial inclusion.