Digital financial inclusion and economic agglomeration: evidence from China’s first inclusive finance reform pilot zone

Digital financial inclusion supports sustainable development by reducing poverty and narrowing regional inequalities. However, gaps in digital access and literacy may limit its reach. This study examines the impact of a 2016 reform in China’s Lankao County using county-level data from 2000 to 2020 and a nonparametric synthetic control method. The results show that the reform significantly increased spatial concentration of economic activity. While inter-county inequality declined, the benefits of the reform may not have been distributed uniformly within counties. Our results further suggest that the observed agglomeration may be shaped by pre-existing economic conditions and patterns of digital adoption. This study contributes to the literature by linking digital financial inclusion with economic agglomeration and providing county-level evidence from a developing economy. The findings highlight the uneven distribution of benefits from digital financial inclusion and underscore the need to broaden participation and digital adoption to ensure more inclusive development outcomes.