Promoting common prosperity: How do digital capability and financial literacy matter?

The pursuit of common prosperity, an important component of inclusive economic growth, has received increased attention in China's socioeconomic development strategy. Although previous studies have explored factors such as technological innovation and labor productivity, the role of digital capability and financial literacy in promoting common prosperity has received little attention. To close this gap, we use data from the 2020 China Family Panel Studies to investigate the direct and indirect impacts of digital capability on common prosperity via the mediating role of financial literacy. Our analysis, which employs ordinary least squares, Probit, and quantile regression models, reveals that digital capability positively influences common prosperity, with more pronounced effects observed among lower-income households. Furthermore, financial literacy is a key mechanism by which digital capability enhances common prosperity, emphasizing the importance of digital inclusion in reducing inequality. These findings provide valuable insights for policymakers who use digital technologies to promote a more equitable society. Our study contributes to the literature by highlighting the critical interplay between digital skills, financial literacy, and inclusive economic growth in China.