Build or Break? The Impact of Rural E-Commerce on Household Income Inequality in China

Abstract

The popularization of information and communication technology (ICT), particularly the extensive use of the digital technologies in rural areas, has propelled the growth of rural e-commerce. Despite the non-negligible role played by rural e-commerce in the revitalization of China's rural areas, how such gains are distributed among rural households remains underexplored. This study aims to assess how rural e-commerce development affects income inequality among rural households, exploring both the direct impacts and underlying mechanisms. We utilize the quasi-natural experiment with the “Rural E-commerce Comprehensive Demonstration Project” (RECD project) and data from the China Household Finance Survey (CHFS) spanning 2013 to 2019. We find that rural e-commerce significantly reduces income inequality. This effect complements the development of digital finance and is more pronounced in regions with extensive online sales of agricultural products. Furthermore, this reduction remains significant regardless of the ex-ante county poverty level. Mechanisms analysis illustrates: (1) a skewed-income increasing effect; (2) efficient reallocation of rural labor between agricultural and non-agricultural sectors; and (3) minimal impact on rural entrepreneurship due to physical capital constraints. These findings provide empirical support for digital agriculture policies and offer guidance for emerging economies aiming to increase farmer incomes and reduce rural household income disparities.