Digital Penetration，Inclusive Finance and Household Wealth Growth

Abstract

With the deep integration of Internet technology and finance, digital finance has become an indispensable part of inclusive finance and an important driving force for the development of inclusive finance. How inclusive finance affects household wealth under the background of digital penetration has become a hot issue. Based on the advantages of digital finance, this paper compares the differences between traditional and digital inclusive finance, and discusses the mechanism and effect of digital inclusive finance in promoting household wealth.Based on the panel data of China Family Panel Studies（CFPS）, this paper finds that digital inclusive finance helps to increase the level of household wealth, and has greater inclusiveness and a stronger leverage effect than traditional finance. This conclusion is further confirmed by 2SLS test with “geographical distance” as the instrumental variable. Different business types of digital inclusive finance have different promotion effects. Monetary fund, electronic payment and other business types have obvious promotion effects on the overall household wealth. Insurance, credit, online investment and electronic credit also have certain positive effects on the overall wealth, but the impact is small. According to the results of heterogeneity test, the effect of digital inclusive finance on household wealth in the central and western regions is stronger than that in the eastern regions; the role of digital inclusive finance in promoting the increase of household wealth depends on the family’s education level and understanding ability, and has a stronger role in promoting the families with high education level and high understanding ability. The degree of digitalization has a significant negative impact on the overall household wealth, which may be related to the phenomenon of “digital exclusion” in digital inclusive finance. Digital exclusion may weaken the role of digital inclusive finance in promoting the growth of household wealth to a certain extent.The research shows that in order to play the positive role of digital inclusive finance in benefiting the real economy and promoting the growth of household wealth, government departments should promote the deep integration of digital finance and traditional finance, give full play to the respective advantages and characteristics of digital finance and traditional finance, and build a complementary and mutually reinforcing financial service system.This study expands the existing research in three aspects: First, based on the background of digital penetration into the financial field, it examines the mechanism and function of digital inclusive finance on household wealth. Second, it compares and tests the differences between digital inclusive finance and traditional inclusive finance in promoting household wealth. Third, it tries to use geographical distance as an instrumental variable to overcome endogeneity and carry out comprehensive heterogeneity analysis.