Inclusive or Fraudulent: Digital Inclusive Finance and Urban–Rural Income Gap

This study aims to evaluate the influence of digital inclusive finance on the income levels of farmers and elucidate its operational mechanism. Using statistical data spanning from 2011 to 2020 across 281 prefecture-level cities in mainland China, our findings establish a significant positive correlation between the developmental stage of digital inclusive finance and farmers’ income levels. Additionally, digital inclusive finance plays a constructive role in reducing income disparity between urban and rural areas, primarily through advancing agricultural technological innovations. Heterogeneity analysis reveals that the beneficial impact of digital inclusive finance is more pronounced in regions with higher human capital and lower levels of digital development. Furthermore, we observe a mutually reinforcing relationship between traditional financial development and digital financial inclusion. While affirming the fostering of inclusive and balanced development to some extent, this paper underscores the imperative of addressing the digital divide. The favorable effects of digital inclusive finance are diminished for individuals with low human capital and limited financial literacy, highlighting the necessity of enhancing financial literacy and education among rural residents as pivotal factors for digital inclusive finance to effectively fulfill its inclusive role.