Empirical Study on the Impact of Digital Inclusive Finance on Urban-Rural Consumption Quality Gap based on Dynamic Panel and Spatial Econometric Models

The concept of digital inclusive finance has gained significant attention in recent years, especially in China, where it plays a crucial role in addressing financial exclusion and promoting economic equality. As China strives for common prosperity and balanced development, digital inclusive finance offers a promising solution to bridge the gap between urban and rural residents, enhancing consumption capacity and reducing regional disparities. This study investigates how the development of digital inclusive finance affects the consumption quality gap between urban and rural areas. Using the Digital Inclusive Finance Development Index from Peking University, the study measures the progress of digital finance across provinces. Consumption quality is evaluated through 11 key indicators, with BP neural networks employed to improve evaluation accuracy. The research further explores the dynamic evolution of digital finance using kernel density estimation and KNN methods. To examine the impact on the consumption quality gap, dynamic panel models are applied, focusing on both direct and indirect effects. The study also explores non-linear relationships by using threshold panel models and investigates spatial spillover effects through spatial econometric models, including spatial autocorrelation and Moran’s indices. The results reveal that digital inclusive finance significantly narrows the consumption quality gap between urban and rural residents, with the most pronounced effects observed in the western and southwestern regions. Additionally, the study finds that the development of digital inclusive finance in one province has spillover effects on neighboring areas, indicating the importance of regional coordination. Based on these findings, the study recommends increasing the visibility and accessibility of digital finance, tailoring policies to regional needs, and leveraging spatial spillover effects to maximize its benefits.