  Portfolio underdiversification is one of the most costly losses accumulated
over a household's life cycle. We provide new evidence on the impact of
financial inclusion services on households' portfolio choice and investment
efficiency using 2015, 2017, and 2019 survey data for Chinese households. We
hypothesize that higher financial inclusion penetration encourages households
to participate in the financial market, leading to better portfolio
diversification and investment efficiency. The results of the baseline model
are consistent with our proposed hypothesis that higher accessibility to
financial inclusion encourages households to invest in risky assets and
increases investment efficiency. We further estimate a dynamic double machine
learning model to quantitatively investigate the non-linear causal effects and
track the dynamic change of those effects over time. We observe that the
marginal effect increases over time, and those effects are more pronounced
among low-asset, less-educated households and those located in non-rural areas,
except for investment efficiency for high-asset households.
