Digital financial inclusion and the share of labor income: Firm-level evidence

•Digital inclusive finance (DIF) promotes firms’ labor income share.•The effects of DIF are more significant on small and medium-sized private firms.•The effects of DIF are more effective on labor income share in the western China.•Regional heterogeneity is significant in our findings. We analyze the impact of digital financial inclusion (DFI) on the change in the labor income share of listed firms. Based on small and medium-sized enterprises from 2011 to 2021 in China, we show that the development of DFI plays an important role in promoting the increase in the labor income share of firms, among which the breadth of coverage has a more significant effect. The effect is more significant for private firms than for state-owned firms, and for firms located in western China than in developed regions.