Does improving the Social Credit Environment Promote Common Prosperity?

Common prosperity, a fundamental principle of socialism and a vital characteristic of Chinese path to modernization, hinges upon various factors, among which a robust social credit system plays a pivotal role. This study investigates the causality between enhancing the social credit environment and promoting common prosperity. The time-varying difference-in-differences model empirically examines this relationship using panel data from 2013 to 2022 in 275 Chinese cities. The findings demonstrate a significant positive impact of improvements in the social credit environment on the income levels of residents across diverse cities, thereby narrowing income disparities and fostering common prosperity. Robustness tests further validate this conclusion. Heterogeneity analysis reveals that the benefits of a refined social credit environment are particularly pronounced in driving common prosperity in general cities and in central, western, and northeastern regions of China. Mechanism testing suggests that constructing a social credit system facilitates the promotion of common prosperity through avenues such as the digital economy, advanced industrial structure, entrepreneurial activity, and poverty alleviation policy. This study offers valuable policy insights for leveraging the economic benefits of a sound social credit environment to bolster common prosperity.