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Social Indicators Research

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15.10.2022 | Original Research

The Effect of Digital Financial Inclusion on Relative Poverty Among Urban Households: A Case Study on China

verfasst von: Peng Peng, Hui Mao

Erschienen in: Social Indicators Research | Ausgabe 2/2023

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Abstract

This study examines the effect of digital financial inclusion on relative poverty among urban households in China. Based on the data of the China Family Panel Studies and the Peking University Digital Financial Inclusion Index of China, using the weak relative poverty line to identify relative poverty among urban households, we use a probit model, a mediating effect model, and an instrumental variable method to conduct empirical research. The results reveal that digital financial inclusion helps reduce the probability that urban households will fall into relative poverty. Digital financial inclusion not only promotes entrepreneurship by urban households but also increases their participation in the financial market. The increase in their income flow can be translated into an improvement in the stock of wealth, enabling them to avoid falling into relative poverty. But this effect is heterogeneous. Digital investment and digital credit play more important roles than digital payment. It is also more pronounced in households with higher financial literacy and households in smaller cities. In addition, regardless of how the relative poverty line and digital financial inclusion are calculated, our results are robust. The research in this study is important for a comprehensive understanding of the development of digital financial inclusion and urban relative poverty in developing countries such as China.

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The data come from the “Migrant Workers Monitoring and Survey Report” from the National Bureau of Statistics of China every year in the past decade (http://www.stats.gov.cn/xxgk/). According to the definition in this official report, “rural migrant workers who have left their township” refers to migrant workers who work in an area outside the township for which they have a residence registration (hukou), excluding those who still have part-time jobs in the region of their township.

The data come from both the “Migrant Workers Monitoring and Survey Report” and the China Statistical Yearbook from the National Bureau of Statistics of China (http://www.stats.gov.cn/xxgk/, http://www.stats.gov.cn/tjsj/ndsj/). In addition, the China Statistical Yearbook provides the average annual wages of urban employees at private and non-private enterprises, respectively. We comprehensively calculate the overall average annual wages of urban employees.

This study focuses on the financial market, both formal and informal. The formal financial market refers to participation in stocks, bonds, funds, financial products, derivatives and other markets, and the informal financial market refers to private lending by households (Yin et al., 2015).

See https://aspe.hhs.gov/poverty-guidelines/.

Yu Ebao is based on Alipay, which is China’s largest mobile payment platform and became the world’s largest mobile payment vendor in the second quarter of 2014. Alipay is associated with the TianHong IncomeBox Money Market Fund, which provides users with a channel for investing in the fund on Alipay, that is, on Yu Ebao. When users log in to Alipay, they can transfer money to Yu Ebao, so that they can earn income from the TianHong IncomeBox Money Market Fund. Users can withdraw funds at any time for transfer to an account designated by the user. If a withdrawal amount is large, it will be processed within two days. Even though users withdraw money at any time, the lost profit is only on the day of withdrawal, without losing the profit users obtained earlier.

For information about Alipay, see note 5.

The cost of social integration refers to the consumer spending required to ensure the dignified participation of households in normal socioeconomic activities (Atkinson & Bourguignon, 2000).

A conversion factor of 3.9 means that, in 2011, US$ 1/day equals RMB 3.9/day in Chinese urban areas.

The data comes from the statistical bureaus of various countries.

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Titel: The Effect of Digital Financial Inclusion on Relative Poverty Among Urban Households: A Case Study on China
verfasst von: Peng Peng
Hui Mao
Publikationsdatum: 15.10.2022
Verlag: Springer Netherlands
Erschienen in: Social Indicators Research / Ausgabe 2/2023
Print ISSN: 0303-8300
Elektronische ISSN: 1573-0921
DOI: https://doi.org/10.1007/s11205-022-03019-z

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