Spatial Spillover Effect and Threshold Effect of Digital Financial Inclusion on Farmers’ Income Growth—Based on Provincial Data of China

Round 1

Reviewer 1 Report

The paper is interesting on the application of models to capture links between economic variables (macro and micro), the impact of ict and digital and spatial spillovers and is well structured. The models are correct and well built. However, I would like to point out some aspects to improve, which are indicated in detail in the text with widespread and capillary notes and which I summarize here: 1) it is necessary to insert some more details on the construction of the samples, on the selection of variables, on the data sets used, 2) to point out that these analyzes were carried out pre-pandemic (correct and it would be interesting to rethink the assumptions to verify if and how the Covid impact has modified these effects), 3) expand and enrich the bibliography (it is not totally exhaustive)

Comments for author File: Comments.pdf

Author Response

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Reviewer 2 Report

• There is no section on the limitations (including methodological) of the study
• Further explanation (including methodological) on the decision to choose the econometric estimation models used, their superiority to other established models in the literature would also be needed
• The core explanatory variable of this paper (digital financial inclusion) should be further explained, possibly including a more detailed statistical analysis of its dynamics at the level of Chinese provinces in the period 2011-2019, according to their level of development.
• The impression left is that the period analysed in the study was influenced solely by the period for which the digital financial inclusion index was calculated.
• The variable LFE (Financial expenditure level) has been included in Table 1, but does not appear to be used in the econometric estimates included in the study.
• The study does not include arguments on the very small (often statistically insignificant) influence of Farmers investment on digital financial inclusion and Farmers' income growth.
• Table 1 includes the explained variables in the form of Farmers' income growth, although the unit of measurement reflects the level of income rather than its dynamics. Moreover, Table 2 reinforces this confusion between the level of Farmers' income and the dynamics of Farmers' income by including the first variant. The same confusion is also apparent in section 4.1.

Author Response

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Reviewer 3 Report

Digital Financial Inclusion on Farmers' Income Growth

This is an innovative topic. It applies the literature on digital financial inclusion to a specific market and examines its impact.  The topic of farmers sustainability and inequality are important and relevant. Moreover, the paper is using some models that add rigour. In that sense the paper has a very good degree of originality.

The papers start well in the introduction and emphasizes the importance of the topic especially in the context of China. Nevertheless some data on the size of these  inequalities can be very beneficial to the paper and emphasize even more its importance.

In lines 70-78, although the mechanism of financial inclusion is explained, I believe it needs some more analysis and empirical support,  mentioning relevant literature on both raising capital/credit as well as how network effects can work.

The expression/language in the previous paragraph but also in some other parts needs improvement and be mor accurate. For example, lines 74-76 are not so clear and expressions as ‘From the perspective of space…’ line 83 ‘The marginal contribution is as follows’ line 80 undermine the paper, this is not a marginal but rather a significant contribution.

Analysis. The first paragraph 102-111 provides some ideas, which are not justified. There should be supported by related studies. For example, why financial development promotes high quality growth – what is high quality growth? Ad why is high quality growth promoted in farming, this is a rarher low growth industry.

Again, same argument about justification and references. ‘Digital financial inclusion is the combination of digital finance and inclusive finance’ line 112 and then lines 113-116 the author(s) explain what they think might be obvious but it is not always – i.e. ‘reduces the problem of information asymmetry’ does this problem actually apply in farming? I am not sure.

Then the paper becomes much more solid from lines 116 to 129 because of literature (in line 129 comma is needed).

Some problematic issues repeat themselves i.e. ‘Digital financial inclusion is more inclusive than traditional finance and covers a broader range of people with the help of digital technology and Internet technology 131- 132 why is that – does it apply to farmers that might be digitally illiterate?

Expression here can change the narrative ‘Digital financial inclusion CAN more inclusive…’

I would not further continue this critique and I believe the authors understood my point and how to improve their manuscript.

However I think that 162-185 need rephrasing. It is hard to understand what the threshold really is and why it is a useful research question. In general I think the paper might benefit from dropping the threshold test. It is becoming too complicated.

In the models some more analysis is required. Is there any related literature that uses similar models? What about the choice of the variables? The author(s) also mention that there might be correlation effects – are these effects (cross-correlation autocorrelaton) influencing the models and how? Are there any tests among the variables? Why have these variables (and control variables) been picked?

Table 2 – the authors initially say that they have a sample from 2011 to 2019 but only few years are present.

I am not an expert on such models. However, I have some arguments based on the results. First of all there is significance and that is good. Nevertheless the coefficients are 0.0508 (line 340) and 0.0703 (Line 342), which seem to be rather weak effects. So although significant rather weak and I am sure this is sufficient support for the hypotheses. In any case the author(s) do not provide effective explanation and interpretation. The same applies for other effects later.

On the threshold effect. Much significance on the 1% level. However what do the values really mean?

Author Response

Response to Reviewer 3 Comments

Title:  Spatial spillover effect and threshold effect of digital financial inclusion on farmers' income growth

Journal: Sustainability

Manuscript Number: sustainability-1562686

Dear Reviewer 3:

Thank you for your letter and for the Reviewer 3’s comments concerning our manuscript entitled “Spatial spillover effect and threshold effect of digital financial inclusion on farmers' income growth”. Those comments are all valuable and very helpful for revising and improving our paper, as well as the important guiding significance to our researches. We have studied comments carefully and have made corrections which we hope meet with approval. The revised portion is marked in red in the paper. The main corrections in the paper and the response to the Reviewer 3’s comments are as following:

Point 1: This is an innovative topic. It applies the literature on digital financial inclusion to a specific market and examines its impact.  The topic of farmers sustainability and inequality are important and relevant. Moreover, the paper is using some models that add rigour. In that sense the paper has a very good degree of originality.

Response 1: Thank you very much!

Point 2: The papers start well in the introduction and emphasizes the importance of the topic especially in the context of China. Nevertheless some data on the size of these inequalities can be very beneficial to the paper and emphasize even more its importance.

Response 2: Thank you very much!

Point 3: In lines 70-78, although the mechanism of financial inclusion is explained, I believe it needs some more analysis and empirical support, mentioning relevant literature on both raising capital/credit as well as how network effects can work.

Response 3: Thanks for your suggestion. According to Reviewer3’s comments, this paper has added relevant literature to support analysis. The specific content is in section 2.1, line 78 and line 117-155.

Point 4: The expression/language in the previous paragraph but also in some other parts needs improvement and be mor accurate. For example, lines 74-76 are not so clear and expressions as ‘From the perspective of space…’ line 83 ‘The marginal contribution is as follows’ line 80 undermine the paper, this is not a marginal but rather a significant contribution.

Response 4: Thanks for your suggestion. According to Reviewer3’s comments, this paper has made the corresponding modification. The specific content is marked red in line 78 and line 84.

Point 5: Analysis. The first paragraph 102-111 provides some ideas, which are not justified. There should be supported by related studies. For example, why financial development promotes high quality growth – what is high quality growth? Ad why is high quality growth promoted in farming, this is a rather low growth industry.

Response 5: Thanks for your suggestion. This paper should be modified to say that financial development promotes rapid rural economic growth, rather than high-quality growth, and we have found some related studies to support it. The specific content is marked red in line 108.

Point 6: Again, same argument about justification and references. ‘Digital financial inclusion is the combination of digital finance and inclusive finance’ line 112 and then lines 113-116 the author(s) explain what they think might be obvious but it is not always – i.e. ‘reduces the problem of information asymmetry’ does this problem actually apply in farming? I am not sure.

Response 6: Thanks for your suggestion. Supported by information technology, digital financial inclusion reduces the problem of information asymmetry, because digital financial inclusion relies on big data and digital technology to accelerate the dissemination of information, so that poverty people can access financial activities more easily and gain benefits through participating in some financial activities. We added relevant literature to support it. The specific content is marked red in line 119.

Point 7: Then the paper becomes much more solid from lines 116 to 129 because of literature (in line 129 comma is needed).

Response 7: Thanks for your suggestion. According to Reviewer3’s comments, this paper has made the corresponding modification.

Point 8: Some problematic issues repeat themselves i.e. ‘Digital financial inclusion is more inclusive than traditional finance and covers a broader range of people with the help of digital technology and Internet technology 131- 132 why is that – does it apply to farmers that might be digitally illiterate?

Expression here can change the narrative ‘Digital financial inclusion CAN more inclusive…’

I would not further continue this critique and I believe the authors understood my point and how to improve their manuscript.

Response 8: Thanks for your suggestion. Digital financial inclusion is more inclusive than traditional finance and covers a broader range of people with the help of digital technology and Internet technology. Traditional finance is a limited and relatively single financial activity, which only includes the three traditional businesses of deposit, loan and settlement. Traditional finance relies on setting up physical outlets to develop financial institutions, while digital financial inclusion relies on digital technology to exert the zero-marginal cost effect of network and promote the rapid and inclusive development of digital finance in remote areas. The specific content is marked red in line 136-143.

Point 9: However I think that 162-185 need rephrasing. It is hard to understand what the threshold really is and why it is a useful research question. In general I think the paper might benefit from dropping the threshold test. It is becoming too complicated.

Response 9: Thanks for your suggestion. According to Reviewer3’s comments, this paper has modified it. Digital financial inclusion has different effects on regional economic growth at different stages of its development. Affected by factors such as residents' cultural quality and Internet penetration, the main participants of digital financial inclusion in the early stages of development are urban residents, and the participation of rural res-idents is low. With the development of the Internet and the improvement of rural infrastructure, digital financial inclusion does not need to rely on physical outlets to pro-vide financial services for people. Therefore, the number of financial users in remote areas such as rural areas grow rapidly. And digital financial inclusion investment is a problem, for different service object, digital financial inclusion has different impacts on them. So by in the financial support for the reasonable and avoid financial resources mismatch problem, which is beneficial to the combination of the combination of digital financial inclusion and farmers' production and farmers' production, thereby increasing farmers' income growth. The specific content is marked red in line 177-185.

Point 10: In the models some more analysis is required. Is there any related literature that uses similar models? What about the choice of the variables? The author(s) also mention that there might be correlation effects – are these effects (cross-correlation autocorrelaton) influencing the models and how? Are there any tests among the variables? Why have these variables (and control variables) been picked?

Response 10: Thanks for your suggestion. The paper cited the literature of the research using correlation model and tested the spatial correlation of the two core variables. It was because there was a spatial positive correlation between farmers' income and digital financial inclusion that the subsequent empirical analysis was meaningful. The choice of variables was sorted out by referring to the studies of most other scholars. The specific content is in line 252 and line 313-346.

Point 11: Table 2 – the authors initially say that they have a sample from 2011 to 2019 but only few years are present.

Response 11: Thanks for your suggestion. In China's research, digital financial Inclusion Index is a very representative comprehensive index for the study of digital finance. However, the research cycle of this index is not long, which is also a limitation of the research on the development of digital finance. However, its prediction results are still fair and reasonable. This is also an important reason why many researches use this index to measure financial development. The paper added content about the rationality of using digital financial inclusion and marked red in line 351-354.

Point 12: I am not an expert on such models. However, I have some arguments based on the results. First of all there is significance and that is good. Nevertheless the coefficients are 0.0508 (line 340) and 0.0703 (Line 342), which seem to be rather weak effects. So although significant rather weak and I am sure this is sufficient support for the hypotheses. In any case the author(s) do not provide effective explanation and interpretation. The same applies for other effects later.

Response 12: Thanks for your suggestion. In the statistical sense, the size of the numerical value is not very important. The empirical results of this paper are significant, so it is valid and supportive. Farmers' income growth is highly and positively affected by the development of digital financial inclusion. The development of digital financial inclusion has a spillover effect on farmers' income growth: it improves farmers' income growth within the province as well as in the neighboring provinces. On the one hand, digital financial inclusion provides credit support for rural residents, increases the possibility of farmers' investment and entrepreneurship, and makes it possible for farmers to obtain income not only from pure agriculture but also from other sources. On the other hand, digital financial inclusion broadens the coverage of financial services through its network characteristics, enabling more low-income people to use simple financial services more efficiently, thus improving farmers' income. The specific content is in line 414-417 line 444-449.

Point 13: On the threshold effect. Much significance on the 1% level. However what do the values really mean?

Response 13: Thanks for your suggestion. The threshold effect is verified by the threshold model, and the existence of several digital financial inclusion thresholds is determined by the threshold value estimated by the model, so as to analyze the influence of different digital financial inclusion development degrees on farmers' income growth. Through threshold estimation, we can know the influence of the development degree of digital financial inclusion on the increase of farmers' income. By determining whether there is the threshold effect of digital financial inclusion as the threshold, we can control the intensity of financial input, so as to carry out the rational allocation of financial resources.

Thanks for your valuable comments. This manuscript has been edited and proofread according to your valuable comments.

We hope that the revised version of the manuscript is now acceptable for publication.

We look forward to hearing from you soon.

Author Response File: Author Response.docx

Round 2

Reviewer 3 Report

The authors have tried to improve the manuscript. According to my previous comments it needs much work and in some places it is not clear what the authors are doing wand what the results mean. So I would stick to my previosu opinion of a rehect.