A Study on Mechanism of Digital Inclusive Finance forCommon Prosperity in High-quality Development

How to balance the economic development efficiency and social equity is the key to achieving high-quality economic development,rural revitalization .andcommon prosperity.Based on the inherent needs of China’s high-tuality develop.ment , this paper first analyzes the theoretical logic about how the technical attributes of information and inclusive attributes olfinance contained in digital inelusive finance promote and realize the goal of common prosperity from the perspectives of distri-bution fairess and elficiency, and then selects 277 regions in China as research samples to conduct an empirical test with thehelp of the “Digital Finaneial lnelusion lndex” from Peking University. It demonstrates the theoretical mechanism of digital inclusive finance in promoting the achievement of common prosperity from the perspective of information technology attribute andfinaneial inclusion attribute and the integration of the two. The empirical study makes a horizontal comparison of the differentiated ellects of different types of digital inclusive finance business on promoting the achievement of common prosperity, basedon the research on the breadth, depth and digitalization degree of digital inclusive finance. Finally, the heterogeneity of the a-bove effects is analyzed according to the characteristics of cities. The main findings of this paper are as follows: First of all.the breadth of “universal” and the depth of “benelt” in digital inclusive finance significantly contribute to improving the efficiency of economy and narowing the income gap between urban and nural areas by breaking the finaneial exclusion of tradition-al financial services. However, the deepening of digitalization has led to a larger digital divide and widened the income gap,highlighting the importance of good integration of digital technology and inelusive finance. Secondly, through the cross sectional comparison of the six major businesses of digital inelusive finance, it is found that the integration elfect of digital technologin capital integration financial business is better than that in capital allocation financial business, which indicates that optimizing capital allocation with the help of digital technology will become the key to the development of digital inclusive finance inthe future. “Thirdly, the diferent characteristics of cities create heterogeneous elfects on the elfects of economic efficiency andequity in the development of digital inclusion finance. The locations of different cities allow the easterm region to receive moreconomic elficieney dividends and narrow the urban-ural income gap in the central and western regions. Similary, digital financial inclusion shows stronger positive elects in cities with higher levels of economic development. In addition, digital financial inelusion can address capital distortions by both bridging capital gaps and reallocating redundant capital, and over-alocated areas receive far more dividends than underallocated areas. The empirical results on SMlEs’ access to finance show thadigital inelusive finance business improves rural income and reduces the urbanural gap by complementing the business scopeof traditional financial institutions, but its elect on total factor productivity is ellective only in areas with diverse access to finance. Finally, having a strong capacity for innovation and entrepreneurship is another key for digital inclusive finance to promote common prosperity. Based on the above conclusions, this paper suggests that optimizing the structure of the digital inclusive financial system, improving the level of digital applications in rural areas, properly understanding and improving inclusivefinancial services, and maintaining a favorable finaneial environment are important cornerstones for gradually promoting com-mon prosperity in the context of high-quality development.

Recommended citation: Xinyue Zhang*, Bo Shi, Junjie Zhen. (2022). "A Study on Mechanism of Digital Inclusive Finance forCommon Prosperity in High-quality Development." Collected Essays on Finance and Economics (in Chinese). (09).
Download Paper | Download Slides