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The Trickle‐down Effect of Fintech Development: From the Perspective of Urbanization
Author(s) -
Zhang Xun,
Tan Ying,
Hu Zonghui,
Wang Chen,
Wan Guanghua
Publication year - 2020
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12310
Subject(s) - urbanization , the internet , business , digital divide , economic growth , china , development economics , economics , geography , computer science , archaeology , world wide web
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.