Digital Financial Inclusion and Consumption Smoothing in China
By J. Lai, Isabel Kit-Ming Yan, Xingjian Yi, Hao Zhang. China & World Economy, 2020
114 citations recorded by the source corpus.
In this paper, we investigate the effect of digital financial inclusion (DFI) on household consumption smoothing in China. We use four waves of the biennial China Family Panel Studies from 2010 to 2016, during which time DFI has significantly developed alongside financial technology across China. We split household income shocks into permanent and transitory components, and evaluate if DFI may help households to buffer against these shocks. We find that households are not able to insure against permanent shocks to income, but they can smooth approximately 70 percent of transitory shocks to income. We also find that DFI has diminished households’ ability to insure against transitory income shocks. This is partly because online purchase may lead to the oversensitivity of consumption to income. In addition, we find that contrary to DFI, traditional financial sector development contributes to better household consumption smoothing against transitory income shocks.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/fbe69ad56e631583a0bc3af124e4f2d62796ae77
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In Economics and Econometrics
Citations in the corpus
- Digital financial inclusion and economic growth: provincial data analysis of China (2021, background): “Among them, China and India are leading with 87%, and Japan has the lowest 34%.1 Since the Chinese government initiated ‘The Plan for Promoting the Development of Inclusive Finance’ in 2015, digital financial inclusion has achieved remarkable growth in China (Lai et al. 2020).”