The Impact of Digital Inclusive Finance on Rural Consumption Upgrading

Abstract

Against the strategic backdrop of establishing a new dual-circulation development paradigm and comprehensively advancing rural revitalization, activating the rural consumption market and promoting the upgrading of rural household consumption have become core levers for expanding domestic demand. In this context, digital inclusive finance serves as a critical policy instrument for overcoming rural financial exclusion and unlocking rural consumption potential. Based on balanced panel data from 30 provinces in China from 2011 to 2023 (excluding the Xizang Autonomous Region and Hong Kong, Macao, and Taiwan), this study measures consumption upgrading by the share of rural household service consumption (education, culture and entertainment + healthcare expenditure / per capita total consumption expenditure). Using the Peking University Digital Inclusive Finance Index as the core explanatory variable, this paper employs an individual fixed-effects panel model with a linear time trend, subsample heterogeneity regressions, and the Baron and Kenny three-step mediation approach to systematically examine the effect of digital inclusive finance on rural household consumption upgrading, as well as its regional heterogeneity and transmission mechanisms. The results show that: First, the benchmark regression indicates that digital inclusive finance exerts a significantly positive driving effect on rural household consumption upgrading. Specifically, for every one-unit increase in the aggregate digital inclusive finance index, the share of rural household service consumption increases significantly by 0.0213 percentage points, which is statistically significant at the 1% level, thereby confirming the core research hypothesis H1. Second, the heterogeneity analysis reveals a significant “increasing marginal effect” characteristic in the driving effect of digital inclusive finance, with the magnitude of influence following the pattern of “western region > central region > eastern region.” The regression coefficient is 0.0429 for the western region (significant at the 1% level), 0.0283 for the central region (significant at the 10% level), while no significant effect is observed in the eastern region. This finding verifies the latecomer advantage and inclusive growth attributes of digital inclusive finance in less developed regions, supporting research hypothesis H2. Third, the mechanism test demonstrates that the alleviation of liquidity constraints—proxied by the logarithm of rural households’ per capita total consumption expenditure—constitutes a full mediating pathway through which digital inclusive finance affects rural consumption upgrading. In other words, digital inclusive finance promotes the upgrading of the consumption structure solely by easing rural households’ liquidity constraints and expanding consumption expenditure. After controlling for the mediating variable, the direct effect of digital inclusive finance is no longer significant, thereby validating research hypothesis H3. The conclusions of this study clarify the internal logic through which digital inclusive finance drives rural consumption upgrading, and provide empirical evidence and policy implications for improving the rural digital inclusive finance system, stimulating the rural domestic demand market, and advancing rural revitalization.