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FinTech development and household resilience to negative income shocks: The role of informal risk sharing

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  • Li, Rongda
  • He, Jing

Abstract

In this study, we investigate the impact of FinTech development on household resilience to negative income shocks from the perspective of informal risk sharing. We find that experiencing negative income shocks weakens household resilience by 33.17% on average, and the enhancement of FinTech development by 1% mitigates the impact of negative income shocks on household resilience by 1.3974% on average. By estimating the marginal effects for households at different well-being quantile groups, we further disclose that the effects of regional FinTech development on household resilience to negative income shocks are more prominent in richer households, showing the potential challenges of the digital divide, although the mitigation effect of FinTech is significant for all groups. The mechanisms underlying the effects of regional FinTech development on household resilience to negative income shocks are increases in the income transfer within risk-sharing networks among households due to the reduction of risk-sharing costs, especially for households with strong ties. The results further confirm the importance of FinTech development and informal risk-sharing to households on household resilience enhancement.

Suggested Citation

  • Li, Rongda & He, Jing, 2024. "FinTech development and household resilience to negative income shocks: The role of informal risk sharing," International Review of Economics & Finance, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:reveco:v:94:y:2024:i:c:s1059056024003939
    DOI: 10.1016/j.iref.2024.103401
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