Digital Finance and Household Consumption Insurance: The Bounded Inclusive Effect

Income risk has emerged as a formidable challenge confronting residents of emerging market countries. Using the data from china household finance survey (CHFS), this paper finds the bounded inclusive effect of digital finance on household income-risk-coping based on partial insurance model. Results show that digital finance has significantly enhanced consumption insurance abilities of Chinese households in response to persistent income shocks, while the effect is insignificant in the face of transitory shocks. Mechanism analysis reveals that these effects mainly come from the unbalanced impact of digital finance on the cost of household financial participation. Digital finance lowers the transaction cost while it has a limited impact on barriers to entry. Furthermore, the promoting effect of digital finance is less significant among low-income groups, rural areas, and for non-subsistence consumption.