DOES DIGITAL INCLUSIVE FINANCE PROMOTE ENTREPRENEURSHIP? EVIDENCE FROM CHINESE CITIES

Abstract

There is a significant interest among policymakers and academics about whether or not digital inclusive finance (DIF) has achieved its intended effect in promoting entrepreneurship in China. This paper addresses this question from both the theoretical and empirical perspectives. Based on the panel data of 284 prefecture-level cities from 2011 to 2019 in China, this paper empirically explores the influence and mechanism of DIF on urban entrepreneurship by employing the fixed effect model and the interactive fixed effects model. The results show that the aggregate index of DIF, coverage breadth index (CBI), usage depth index (UDI) and digitization-level index (DLI) of DIF do significantly promote entrepreneurship. Moreover, further tests of robustness and endogenous treatment also have proved incentive effect. DIF can promote entrepreneurship through three mechanisms: increasing government infrastructure investment, stimulating resident consumption and motivating enterprise innovation. Heterogeneity analysis shows that the effect of DIF in promoting entrepreneurship is more obvious in medium-sized enterprises, the western regions and regions with low levels of entrepreneurship. Therefore, the government needs to vigorously accelerate the development of DIF and create a good external environment for entrepreneurship. DIF policies should be regionally differentiated to more effectively achieve the entrepreneurial targets.