Does Internet use alleviate household financial vulnerability? An empirical analysis based on panel data from China Family Panel Studies (CFPS)

Abstract

As digital technologies increasingly shape household financial behavior, understanding their role in buffering financial shocks has become an important policy and research concern. Drawing on panel data from the 2016, 2018, and 2020 waves of the China Family Panel Studies (CFPS), this paper investigates whether and how Internet use mitigates household financial vulnerability. The empirical results indicate that Internet use significantly lowers both the likelihood and severity of household financial vulnerability, a conclusion that holds after a series of robustness tests and corrections for endogeneity. Mechanism analysis reveals that this effect operates primarily through three channels: boosting income growth, promoting wealth accumulation, and enhancing risk management capabilities. Further heterogeneity analysis shows stronger mitigating effects in western regions, rural areas, and among households headed by individuals under the age of 60. These findings suggest several policy implications: deepen digital development by improving infrastructure and raising digital literacy to broadly reduce financial vulnerability; expand household income and wealth accumulation channels through innovative, technology-driven financial products that strengthen risk management; and prioritize equitable digital advancement, focusing on western regions, rural households, and older populations to narrow the digital divide and reduce systemic financial risk.