Study on the influence of Internet finance on urban household savings rate: Evidence from China

Abstract

This study aims to investigate the impact of Internet finance on the urban household savings rate. We constructed a theoretical model to depict the mechanism of how Internet finance influences urban household savings rates. For empirical analysis, we use the cross-sectional data from the China Household Finance Survey (CHFS) and conduct ERM to attain the extent to which Internet finance affects savings rates. The results show that the behavior of urban households participating in Internet finance has a significantly reduced effect on the urban household savings rate. In addition, the results of heterogeneity analysis show that the effect of Internet finance on the savings rate for urban households with a low level of assets and income is stronger and more significant, which has strong political implications. The results also show that households with older average age are not significantly affected by Internet finance, which reveals the possible limitations. This study provides a theoretical model to reveal the mechanism of how Internet finance reduces household savings rate and uses empirical analysis to measure the marginal influence of Internet finance on urban household savings rate, as well as offers suggestions for better development of Internet finance.