The Function of Digital Inclusive Finance in Shaping Urban Household Consumption: Insights from a 2011–2023 City-Level Panel in China

Abstract

Against the backdrop of China's transition toward a development model driven by domestic demand and high-quality growth, unlocking the consumption potential of residents has become a pressing and essential challenge. As a key outcome of the integration between technology and finance, Digital Inclusive Finance ( ) is coming into view as a new way of stimulating consumption growth. Drawing on a city-level panel dataset encompassing 296 cities from 2011 to 2023—characterized by its extensive temporal span and wide geographic coverage—this paper captures the dynamics of both the development of  and shifts in consumption patterns. Building on this foundation, this paper not only conducts an positive analysis of the direct promotive effect of  on urban household consumption, but also examines its underlying mechanisms through three sub-dimensions: coverage breadth ( ), usage depth ( ), and the degree of digitalization ( ). The results reveal that  significantly promotes urban household consumption, which are consistently supported by a series of robustness texts. Heterogeneity analysis further indicates that the positive effect of  on consumption is more pronounced among high-income groups, in regions with underdeveloped communication infrastructure, and in cities exhibiting greater foreign direct investment. This verifies the variation in effect intensity across cities with different characteristics. Building upon these findings, this paper recommends promoting the development of  in a city-specific manner, maximizing the effectiveness of the allocation of policy resources, and perfecting the precision of financial service delivery. Such efforts are expected to further unleash urban consumption potential and contribute to the pursuit of quality-focused economic modernization.