Digital Literacy and Household Debt: Evidence From Rural China

ABSTRACT As rural digital infrastructure improves, digital literacy is emerging as a critical form of human capital for sharing the dividends of the digital economy, profoundly influencing the financial behaviour of rural households. Based on data from the China Rural Revitalization Survey (CRRS), this paper examines the impact of the enhancement of rural households' digital literacy on their household debt. The core finding is that enhanced digital literacy significantly boosts the probability and the magnitude of rural household debt. We subsequently identify two important mechanisms. Firstly, higher digital literacy is associated with a significant decrease in subjective income satisfaction, which in turn motivates households to debt to bridge perceived psychological disparity. Secondly, our findings indicate that enhanced digital literacy incentivizes households to increase their debt to capitalize on e‐commerce opportunities. Further heterogeneity analyses reveal that the stimulating effect of digital literacy on rural household debt is stronger among economically advantaged rural households, in villages with developed logistics, and in non‐suburban rural regions.