Digital financial inclusion, resident consumption, and urban carbon emissions in China: A transaction cost perspective

Abstract

Using data from 283 Chinese cities from 2011 to 2018, this study empirically investigates the impact of digital financial inclusion on urban carbon emissions. We conclude that digital financial inclusion significantly promotes urban carbon emissions. Moreover, as urban carbon emissions increase, the marginal effect first grows and then dwindles. A further investigation shows that digital financial inclusion significantly promotes urban carbon emissions by increasing resident consumption. Finally, we find that the impact of digital financial inclusion on urban carbon emissions is heterogeneous in terms of city size, city rank, and the commercial credit environment. In addition, digital financial inclusion has spillover effects on urban carbon emissions. It delivers positive effects on the local city while imposing significant suppressing effects on carbon emissions in neighbouring cities. The reason possibly is that digital financial inclusion in China is still in its early stage and it delivers ‘polarization effects’.