Internet penetration and consumption inequality in China

Shu Zhang,Jing Jian Xiao,Feng Li

doi:10.1111/ijcs.12575

Abstract

AbstractGrowing research shows that information technology accelerates economic growth and development, but the effect of Internet penetration on inequality is less well documented, especially about consumption inequality. On the one hand, Internet lowers transaction costs and offers equal access to online products especially beneficial for remote and poor populations, seemingly reducing inequality. On the other hand, uneven access to the Internet may increase divergences. This study examines the relationship between Internet penetration and consumption inequality. Using data from 155 counties available from 2010 to 2016 China Family Panel Studies, this study examines whether Internet penetration potentially impacts consumption inequality considering regional heterogeneity. Based on fixed‐effect models and the two‐stage least squares regressions, results suggest the Internet penetration may increase consumption inequality measured by the Gini index. Furthermore, higher education and over a certain Internet penetration rate buffer the positive impact of the Internet. In some cases, the Internet has smaller positive or even negative impacts on consumption inequality in regions with higher education levels and over threshold penetrations.

Highlights

Despite the sustained high economic growth in China, the share of household consumption in GDP is declining and inadequate (Aziz and Cui, 2007)
Following Gao, Zang, and Sun (2018), we explore the change of provincial internet penetration rate, caused by an exogenous policy shock (Cuncun Tong project), as the instrumental variable of county-level internet penetration
We explore the impact of the predicted internet on consumption inequality

Summary

Introduction

Despite the sustained high economic growth in China, the share of household consumption in GDP is declining and inadequate (Aziz and Cui, 2007). The household consumption ratio (% of GDP) has decreased from 46.9% in 2000 to 35.4% in 2010. Widening consumption disparities are one of the most remarkable social concerns in recent years. In China, consumption inequality has an increasing wave-like trend over last three decades (Ding & He, 2018; Xia, Li, & Song, 2017) and is more severe within inland areas, poor areas, and higher-education groups (Qu & Zhao, 2008; Zhao et al, 2017). Research on the reduction of the disparities is necessary for balanced economic developments

Methods

Results

Conclusion