Does Digital Inclusive Finance Mitigate the Negative Effect of Climate Variation on Rural Residents' Income Growth in China?

Abstract

Global anthropogenic greenhouse gas emissions have exacerbated climate variation. Climate variation impacts the agricultural production and rural residents’ income negatively, further widening the urban-rural income gap and harming the co-benefits. Narrowing the income gap has always been a global concern and an important part of China’s rural revitalization strategy. However, little is known about whether digital inclusive finance can mitigate the negative impact of climate variation on rural residents’ income growth in China. Using panel data from 31 provinces in China from 2011 to 2019 and a digital inclusive finance index developed by Peking University, together with historical temperature data, this study examined the impact of digital inclusive finance on Chinese rural residents’ income growth in response to climate variation. It was found that digital inclusive finance could promote rural resident operating, wage, and transfer income growth. A heterogeneity analysis revealed that rural residents in central and western regions experienced larger digital inclusive finance facilitating effects on income growth than the eastern regions. Further analyses using the Spatial Dubin Model found that digital inclusive finance had a spatial spillover effect as it could significantly promote income growth in neighboring provinces. Although climate variation reduced rural residents’ income and increased their risks, digital inclusive finance significantly mitigated this negative effect. Digital information infrastructure construction, financial risk prevention, digital financial knowledge, and e-commerce popularization were practical paths to optimizing inclusive finance development in rural areas and promoting poverty alleviation and rural revitalization to resist climate risks.