Mobile payment and Chinese rural household consumption

Abstract The problem of high savings and low consumption of Chinese rural households has long been a source of concern. The popularity of mobile payments may help alleviate this problem. This paper examines the impact of mobile payments on household consumption in rural China by using data from the China Household Finance Survey (CHFS). To overcome the potential endogeneity, we use the instrumental variable (IV) and difference-in-differences (DID) methods and find a significant positive effect of mobile payments on rural household consumption. Mechanism analysis indicates that the positive impact of mobile payments is partially explained by the reduction in transaction costs, the easing of liquidity constraints, and the decrease in mental accounting loss. Furthermore, we verify the inclusive function of mobile payments through heterogeneity analysis and find that they play a greater role in promoting rural household consumption, especially for socially vulnerable groups, such as the elderly, people on low incomes, and low education. Our findings contribute to the literature on consumer finance and inclusive finance and have important implications for other countries.