The Effect of Traditional Inclusive Finance and Digital Inclusive Finance on income Gap between Urban and Rural Residents

The rapid development of digital finance and traditional inclusive finance is expanding quickly in the past decades. Some articles discovered that the growth of inclusive digital finance and traditional inclusive finance boosts the income gap between urban and rural residents becomes narrow. This paper will use digital finance and traditional finance as the independent variable to discover their impact on the income differences between urban and rural residents using panel data during 2011-2018 in 31 provinces. The study focuses on discovering whether the role of inclusive digital finance on the income differences between urban and rural residents would be different based on different development levels of traditional inclusive finance. There is a regional disparity between inclusive digital finance and traditional inclusive finance on the rural-urban income gap. Traditional inclusive finance has a double threshold effect on the income gap, with inclusive digital finance as the threshold value. Moreover, as the digital financial inclusion index rises, traditional financial inclusion will widen the gap between the rich and the poor. Besides, inclusive digital finance also has a double threshold effect on the income gap with the traditional inclusive finance as the threshold value. It means digital inclusive finance will effectively reduce the gap between the rich and the poor by improving traditional inclusive finance.