Digital inclusive Finance and agricultural development: ‘ensuring stable production and supply’ or ‘improving quality and efficiency’? Evidence from factor misallocation

Introduction This study examines whether digital inclusive finance primarily promotes agricultural “quantity” (output expansion) or “quality” (total factor productivity, TFP) upgrading—an underexplored question, especially from the perspective of factor misallocation. Methods Using a balanced panel of 254 prefecture-level cities in China from 2011–2022, we measure agricultural TFP and construct relative misallocation indices for capital, labor, and land. Fixed-effects, instrumental-variable, and mediation models are employed to identify causal effects and mechanism. Results Digital inclusive finance significantly increases both agricultural output and TFP, with a stronger quality-oriented effect. A 1% increase in the digital inclusive finance index is associated with a 0.174% rise in agricultural output and a 0.183% rise in agricultural TFP. Mechanism tests suggest that these effects mainly operate through mitigating factor misallocation and improving the allocation of capital, labor, and land. The impacts are more pronounced in the central and western regions and in non-major grain-producing areas with weaker agricultural endowments. Discussion Policy efforts should strengthen rural digital financial infrastructure and adopt region-specific strategies to foster high-quality agricultural development.