Bridging the gap: the effect of rural e-commerce development on internal income inequality in China

Abstract

ABSTRACT The burgeoning sphere of rural e-commerce has garnered considerable acclaim for its digital economy dividends, yet the literature presents a gap in evaluating its repercussions on household internal income inequality. Regarding the Rural E-commerce Demonstration County (REDC) program implemented in batches as a quasi-natural experiment, we employ the staggered difference-in-differences (SDID) method to explore causal relationships between rural e-commerce development and internal income inequality. Results show that rural e-commerce development significantly reduces internal income inequality in China. Using the Bacon decomposition method and exclusion of potential spillover effects, we confirm the reliability of our SDID estimates. We find that this positive effect is explained by non-farm employment and entrepreneurial activities, information advantages, and infrastructure development. Furthermore, we reveal the inclusive characteristics of rural e-commerce development but are influenced by the potential digital divide. Our study enriches the research field on the benefits of e-commerce from a new perspective of alleviating income inequality and offers pragmatic insights for harnessing e-commerce tools as vehicles for attenuating income disparity and fostering social equity in developing countries.