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Digital Financial Inclusion and Income Inequality in China
Author:
Yan Shen
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Fei Han https://isni.org/isni/0000000404811396 International Monetary Fund

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Yanlong Li
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Series:
IMF Working Papers
Volume/Issue:
Volume 2025: Issue 071
Language:
English
Publication Date:
04 Apr 2025
DOI:
https://doi.org/10.5089/9798229004749.001
ISBN:
9798229004749
ISSN:
1018-5941
Pages:
35
Keywords:
Digital financial inclusion; income inequality; micro mechanism; IMF working paper 25/71; macro effect; wage income; transfer income; household income; Financial inclusion; Income; Financial sector development; Income distribution; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper uses both macro and household-level data to examine the relationship between digital financial inclusion, measured by the Peking University digital financial inclusion index, and income inequality in China. We find that a higher level of digital financial inclusion is associated with significantly lower income inequality within provinces, including through having larger positive effects on lower-income households’ incomes from salaries and public and private transfers. However, we do not find a significant impact of digital financial inclusion on income inequality across provinces, as households in the relatively more developed southern region benefitted more from digital financial inclusion than those in the northern region. We also find that digital financial inclusion has larger effects on the incomes of rural, female-headed, and less educated households, which have likely contributed to the narrowing of the overall income inequality, but a smaller effect on the income of elderly households—pointing to the “digital divide” problem among the elderly in China.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund