Abstract: The realization of common prosperity requires effective cooperation between market mechanisms and government forces. This paper is based on the China Household Finance Survey (CHFS) and macroeconomic data, using simultaneous equation model and spatial simultaneous equation model to examine the role and function of the government in the impact of inclusive finance development on common prosperity. Research has found that when spatial influence is not considered, the government plays a dual role in promoting the inclusive finance development and common prosperity, and indirectly contributes to common prosperity by supporting the inclusive finance; After considering the spatial impact, common prosperity and inclusive finance development reflects a positive spillover effect in space. Government intervention can still promote the inclusive finance development, but it exhibits spillover characteristics in achieving common prosperity, that is, neighboring regions’ government intervention helps promote common prosperity in the local area. This not only verifies the rationality of “getting rich first drives getting rich later”, but also provides reference for policy formulation. Therefore, forming a long-term ecological consensus between the government and the financial sector at this stage is a guarantee for the effective implementation of inclusive finance.

Keywords: Inclusive Finance; Common Prosperity; Government Intervention; Market Failure; Simultaneous Equation Model