The Impact of Digital Infrastructure on Rural Household Financial Vulnerability: A Quasi-Natural Experiment from the Broadband China Strategy

Abstract

A digital infrastructure has the potential to mitigate the digital exclusion in rural areas, offering a pathway to alleviate the financial vulnerability of rural households. This paper investigates the impact of the Broadband China pilot policy—an important government initiative—on rural household financial vulnerability, utilizing data from five waves of the China family panel studies (CFPS) spanning from 2012 to 2020. By leveraging the quasi-natural experiment provided by the Broadband China initiative, this study makes a novel contribution to understanding how a digital infrastructure affects financial sustainability in rural households. The findings show that the Broadband China pilot policy significantly reduces rural household financial vulnerability, with particularly strong effects on female-headed households, spousal-headed households, and those in regions with a limited traditional or advanced digital finance infrastructure. Further analysis reveals that a digital infrastructure enhances rural household financial resilience by increasing land transfer opportunities through an ‘income effect’ and by fostering non-farm employment and financial literacy through a ‘security effect’. This paper contributes to the literature by shedding light on the specific mechanisms through which a digital infrastructure enhances the financial sustainability of rural households and offers valuable insights into policies aimed at bridging the rural–urban divide.