Abstract: The opportunities of market participation and the improvement of ability are the persistent endogenous driving force to alleviate relative poverty. However, the micro mechanism of digital finance to alleviate relative poverty by influencing the psychology of poor groups has not been effectively verified. Based on the theory of poverty psychology and behavior, this paper uses the data from the China Family Panel Studies (CFPS) from 2014 to 2018 and employs the counterfactual analysis and instrumental variable two-stage least squares methods to verify the impact of digital finance on the relative poverty of rural households. It also makes use of the intermediary effect method to test the mechanism of market participation behavior. The findings show that, firstly, the use of digital finance has alleviated the relative poverty of rural households, and digital finance has a long-term and stable effect in alleviating relative poverty; secondly, the effect of digital finance on poverty alleviation of rural households with higher income and higher educational level is stronger; finally, the digital finance has promoted farmers' market participation behavior, thereby alleviating their relative poverty. Therefore, we should promote farmers'market participation and give beneficial play to digital finance in alleviating farmer'relative poverty, meanwhile, strive to improve the digital financial literacy of farmers with lower income and lower education level, so as to bridge the digital divide.

Key words: digital finance, relative poverty, market participation, poverty psychology