Raising the bottom and expanding the middle: digital finance adoption and common prosperity of farmers

Purpose Digital finance injects new vitality into achieving shared prosperity among farmers and rural areas. This study investigates the impact and mechanism of digital finance use on farmers' income growth and intra-rural income inequality, specifically assessing its roles in “raising the bottom” and “expanding the middle” within the context of achieving common prosperity in China. In terms of heterogeneity analysis, it pays attention to the different income groups. Furthermore, the mechanism of digital finance use in promoting income growth and reducing income disparities is to be investigated. Design/methodology/approach This study utilizes panel data from CRRS in 2020 and 2022 to construct multidimensional digital finance adoption indicators from three dimensions: digital payments, digital credit, and digital wealth management. It systematically evaluates the impact of digital finance adoption on farmers' income and rural income inequality, and identifies its underlying mechanisms. Findings The results show that digital finance adoption significantly increases farmers' income and reduces income inequality, with these effects mediated through the alleviation of credit constraints, enhanced efficiency in information utilization, and strengthened social interactions. Moreover, the income-enhancing effect of digital finance is most pronounced for low-income households, underscoring its “raising the bottom” function; it also substantially raises the likelihood that low-income households transition into the middle-income bracket, thereby exhibiting an “expanding the middle” effect. Originality/value Adopting a micro-level household perspective, this paper empirically analyzes the dual effects of digital finance – spanning payments, credit, and wealth management – on farmer income levels and the income distribution. It further uncovers the mediating roles of credit accessibility, information efficiency, and social interactions. The study concludes that digital finance fosters inclusive growth by “raising the bottom and expanding the middle,” thereby providing a robust empirical basis for policy-making aimed at enhancing the rural digital financial ecosystem.