Research on the long tail mechanism of digital finance alleviating the relative poverty of rural households

by Shengfeng Xie, Caimin Jin, Ting Song, Chengxiao Feng

Digital finance provides a long-tail mechanism for alleviating relative poverty caused by unequal opportunities and rights. According to the inference of an improved Cobb-Douglas production function and Ramsey-Cass-Koopmans two-stage household consumption model, the long-tail mechanism for digital finance to alleviate the relative poverty of farmers includes productive investment mechanism, credit mechanism, financial asset allocation and entrepreneurial mechanism. An empirical analysis of 11,519 rural households across China based on CHFS2019 data shows that digital finance can significantly and steadily alleviate relative poverty by improving credit availability and promoting household entrepreneurship, while its effect on increasing productive investment opportunities and optimizing financial asset allocation is less certain. Therefore, it is necessary to continue to improve the "blood making" long tail mechanism of digital finance for farmers’ credit and innovation and entrepreneurship, and at the same time guide the digital finance to empower the development of rural industries to increase farmers’ productive investment opportunities, cultivate endogenous growth momentum, and improve the wealth allocation function of rural digital financial market.