In light of China’s all-round promotion of rural revitalization and the pursuit of common prosperity, enhancing the subjective well-being of the rural population has emerged as one of the basic goals of social development. Digital finance is an advanced system of financial services that integrates high-tech information technology to build new ways of overcoming the barriers to traditional financial inclusion. Systematically investigate the impact and internal mechanisms of digital finance use on farmers’ happiness in this paper. Based on the large-scale microdata from the China Household Finance Survey (CHFS) 2019, a general-purpose evaluation system for the use of digital finance has been constructed with three dimensions: digital payment, digital wealth management and digital credit. Based on the results of the ordered Probit (Oprobit) model, it can be concluded that the use of digital finance is positively related to a farmer’s sense of well-being. Further exploration will be made in the paper by exploring the link between the two through livelihood diversification. The above results indicate that digital finance has helped farmers move away from the traditional model of monoculture in agriculture to develop multiple income sources through other means, reducing risks and improving the overall wealth of these households. The welfare effects of digital finance under study vary significantly among different research papers. Rural households with lower human capital, limited material assets, and those in economically backward central and western areas are more positively affected by digital finance in terms of happiness. Therefore, “inclusion” of digital finance can alleviate the problems of the Matthew effect in traditional finance. To ensure the stability of the previous results, robustness tests will also be conducted with Conditional Mixed Processes (CMP) and Instrumental Variables (IV). Provide empirical support and policy suggestions for using digital technology to reduce the urban-rural disparity and improve the all-round living standards of smallholder farmers.
