Digital Financial Inclusion and Air Pollution : Nationwide Evidence from China

We provide nationwide causal estimates of digital financial inclusion’s (DFI) effect on air pollution in the short term for China from 2014 to 2018. Using distance to Xihu District as an instrument, a 1% gain of DFI increases air pollution by 0.36%. The baseline result is strongly robust to various checks. The coverage breadth and usage depth of DFI increase pollution, with elasticities of 0.39 and 0.37 respectively, whereas the digitization level of DFI (i.e., digital service support, measured as convenience and cost) reduces pollution, with elasticity of -1.42. The heterogeneous short-run effects of DFI can be attributed to a multitude of channels, including pollution standard, geographical factors, population density, development gaps and international trade