Digital finance and industrial structure upgrading: Evidence from Chinese counties

The county-level economy holds the potential for future economic growth in China, but traditional finance faces challenges in meeting the needs of county-level economic development and industrial structure upgrading. Digital finance plays a vital role in addressing the challenges faced in county-level development. This study empirically examines the impact and underlying mechanisms of digital finance on industrial structure upgrading using panel data from 1385 counties in China from 2014 to 2020. The empirical results indicate that the development of digital finance significantly promotes industrial structure upgrading, and this finding holds even after conducting a series of robustness tests. Mechanism analysis suggests that digital finance stimulates industrial structure upgrading in the county by fostering entrepreneurial activity and promoting social consumption. Cross-sectional analysis further reveals that the impact of digital finance is more pronounced in regions with lower levels of traditional finance development and efficiency, as well as lower levels of economic development. Additionally, the influence of digital finance diminishes from central to eastern and western regions of China.