Can FinTech curb income inequality in China?

Abstract

The effect of FinTech on income inequality in China and the characteristics of the existing thresholds are examined in this study based on China provincial panel data from 2011 to 2020 by combining dynamic panel differential GMM with panel threshold models. As revealed by this study, (1) FinTech can significantly curb income inequality. (2) FinTech can mitigate income inequality in all regions, and the degree of mitigation is more significant in the central and western regions of China. (3) The improvement of FinTech development can reduce income inequality in all quantiles. The regions with high-income inequality and low-income inequality are compared. The comparison results reveal that FinTech can reduce income inequality to a greater extent in regions with lowincome inequality. (4) FinTech can restrain income inequality under different threshold variables, and the restraining effect of economic growth is the most significant. The policy significance of this study is to fully exploit the empowerment and income-generating role played by FinTech, build a more inclusive financial system, create a good financial environment, cultivate residents’ financial knowledge level, enhance the ability of low-income groups to obtain income from financial services and reduce income inequality, to fulfill the development goal of common prosperity.