How does digital inclusion finance alleviate air pollution? Spatial evidence from 1318 counties in China

Qian Zhou () and Zhipeng Qi ()
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Qian Zhou: Zhongnan University of Economics and Law, Economics School
Zhipeng Qi: Zhongnan University of Economics and Law, School of Finance

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 12, No 34, 29315-29344

Abstract: Abstract Combating air pollution is a crucial component in pursing the sustainable city, and digital inclusive finance (DIF) presents a novel approach to achieve this goal. Using 1318 counties panel data from 2014–2020, we examine the relationship between DIF and air pollution across in China with econometric models. We find that DIF significantly reduces air pollution, with the effect diminishing by 1–2% after accounting for spatial correlation. This conclusion remains robust after incorporating instrumental variables into the spatial econometric model to address potential endogeneity issues. Mechanism results show that DIF optimizes population density in each county, while the economic development, industrial structure optimization, and upgrading mechanisms are not significant. Finally, we find that the use of DIF is most effective in counties with lower environmental pollution, higher economic development, and lower population density. Our paper, on one hand, extends the research on the economic benefits of digital inclusive finance from the perspective of spatial association, and on the other hand, provides new evidence from the urban development standpoint on how new technologies can address environmental issues.

Keywords: Digital inclusive finance (DIF); Air pollution; Spatial econometric models; Population density (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-024-04870-5

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