The Trickle-down Effect of Fintech Development: From the Perspective of Urbanization

Xun Zhang, Ying Tan, Zonghui Hu, Chen Wang, Guanghua Wan

【Abstract】

The emergence of a digital divide or a lack of internet access may hinder urbanization and adversely affect growth. However, fintech development can help to improve the accessibility and affordability of financial services, particularly for sections of the population formerly excluded from such services. Improved access is expected to stimulate the growth essential for promoting urbanization, possibly alleviating the negative impacts of a digital divide and creating a trickle-down effect. This paper is among the first to investigate the effect of fintech development on urbanization, as indicated by labor transfer from agricultural to non-agricultural sectors in China. It is found that: (i) the digital divide hindered, while fintech development contributed to urbanization; (ii) the positive effect of fintech development on urbanization affects individuals both with and without access to the internet, yielding the so-called trickle- down effect and thus helping to alleviate the negative consequences of a digital divide; and (iii) regarding transmission mechanisms, fintech development helps to generate additional jobs and raise income in non-agricultural sectors, stimulating urbanization even for those without access to the internet.

【Key words】digital divide，fintech，labor transfer，urbanization

（张勋，北京大学数字金融研究中心特约高级研究员，北京师范大学统计学院金融统计系副教授、博士生导师）