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How does Digital Finance Affect Common Prosperity "Dynamic Characteristics, Mechanism Identification"

Author(s)

Fang Liu*, Jinhe Song

Affiliation(s)

School of Finance, Shandong Technology and Business University, Yantai, Shandong, China *Corresponding Author.

Abstract

This study investigates how digital financial inclusion influences common prosperity in China, using panel data from 204 cities between 2011 and 2019. By employing a dual-effect dynamic panel model and an intermediary effect model, it examines how digital finance impacts common prosperity through mechanisms such as increasing residents' disposable income and narrowing the urban-rural gap. The findings suggest that digital finance contributes to common prosperity significantly. These conclusions hold even after addressing potential endogeneity, substituting explained variables, and applying different testing methods. Analysis of dimensional heterogeneity reveals the fact that both the coverage breadth and usage depth of digital finance play vital roles in promoting common prosperity. Further mechanism testing identifies capital allocation efficiency as an intermediary factor, indicating that digital finance fosters common prosperity by improving the efficiency of capital allocation. The study highlights the need to accelerate regional digitalization, enhance financial inclusion, and promote equitable sharing of economic development benefits. Recommendations include advancing digital finance, encouraging rural entrepreneurship and innovation, expanding economic opportunities, and optimizing income distribution mechanisms to support common prosperity.

Keywords

Digital Finance; Mesomeric Effect; Common Prosperity for All

References

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