The effect of digital finance on Residents' happiness: the case of mobile payments in China

Chunkai Zhao (), Xing Li () and Jianfeng Yan
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Chunkai Zhao: South China Agricultural University
Xing Li: Southwest University
Jianfeng Yan: Shanghai University of Finance and Economics

Electronic Commerce Research, 2024, vol. 24, issue 1, No 4, 69-104

Abstract: Abstract With the popularization of digital finance in China, mobile payments have penetrated into all aspects of residents' daily life. However, few studies have examined the potential impact of mobile payments on people's happiness in China. Using the nationally representative data from the China Household Finance Survey (CHFS), this study adopts the ordered probit regression with endogenous treatment to adjust for possible endogeneity to assess the effect of mobile payments on residents' happiness. The results suggest an association between mobile payment usage and increases in happiness, which is supported by several robustness checks, such as using an alternative instrumental variable (IV), replacing the explained variable, and removing some extreme observations. In addition, we explore the mechanisms by which mobile payments affect residents' happiness from multiple perspectives. Positive mechanisms include promoting quality of life, reducing transaction costs, stimulating entrepreneurship, and increasing social interaction. However, as a non-cash payment method, mobile payments may also lead to over-consumption, which is detrimental to residents' happiness. Furthermore, the heterogeneous analysis shows inclusive attributes of mobile payments. We find mobile payments have a greater positive effect on happiness of some socially disadvantaged groups, such as elderly individuals, rural residents, the low-educated, and low-income households. These findings supplement the literature on online happiness and financial inclusion and refer to the possible negative impact of mobile payments. Therefore, it is necessary to actively promote mobile payments to benefit more socially vulnerable groups and prevent potential risks from over-consumption.

Keywords: Digital finance; Mobile payments; Happiness; Ordered probit regression with endogenous treatment; China (search for similar items in EconPapers)
JEL-codes: D12 G51 I31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10660-022-09549-5

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