The equilibrium effects of digital technology on banking, production, and employment

Abstract

This paper examines the impacts of China's digital technology on equilibrium outcomes in its labor, product, and loan markets. We show that digital development is good for employment expansion along with a pay rise, and that rapid e-Commerce growth leads to a fall in the price of products and a rise in the quantity of their transactions. It is unclear how loan interest rates change with Fintech adoption, but we find that banks’ lending business will be expanding due to its strong interaction with the digital economy. These theoretical findings are largely consistent with well-documented observations on China.