Does digital finance alleviate household consumption inequality? Evidence from China

The advent of digital finance has mitigated financial constraints for residents in rural areas, offering a new avenue to reduce consumption inequality. This paper examines the relationship between the use of digital finance and consumption inequality based on data from the China Household Finance Survey (CHFS 2019). The results reveal that digital finance has a negative effect on consumption inequality, with a more significant impact on reducing developmental consumption inequality for families. The estimations of testing the potential mechanisms indicate that digital finance mitigates income disparities and heightens risk preferences, thereby reducing consumption inequality among rural residents.