Digital finance and subjective well-being of urban residents in China: an empirical analysis from the perspective of household assets

Using panel data from 2013–2019, this paper examines the impact of digital finance on the subjective well-being (SWB) of urban residents in China from a household asset perspective. Employing two-way fixed effects and instrumental variable approaches, we identify both the average and nonlinear effects of digital finance on SWB and explore the underlying asset-based mechanisms. The results show that digital finance significantly improves urban residents’ SWB, and this effect remains robust after addressing endogeneity and multiple robustness checks. Further analysis reveals diminishing marginal effects, mainly driven by usage depth and digitalization. Mechanism analyses indicate that digital finance affects SWB through three asset channels: increasing asset income, alleviating liquidity constraints, and optimizing household asset structure. However, liquidity relaxation is accompanied by potential risks, as excessive borrowing may increase debt burdens and weaken economic security, thereby dampening well-being gains. Heterogeneity analysis shows larger effects for individuals with higher risk aversion and lower financial literacy, while city-level differences are insignificant. Overall, the welfare value of digital finance is more likely to be realized when it supports stable asset accumulation and long-term financial security, underscoring the importance of usage quality and risk management.