How Does Digital Infrastructure Mitigate Urban–Rural Disparities?

Abstract

The development of digital infrastructure plays a crucial role in addressing regional disparities, especially in bridging urban–rural gaps. This paper evaluates the impact of the “Broadband China Strategy” (BCS), which exogenously accelerated broadband infrastructure expansion in both urban and rural areas. Using a staggered difference-in-differences (DID) approach, we assess the long-term effects of broadband adoption on labor market outcomes. Our findings show that BCS increased rural wages by 7% to 9%, with no significant impact on urban wages. The wage increase in rural areas is primarily driven by job creation and human capital accumulation, both of which contribute to narrowing the urban–rural wage gap. Additionally, the study uncovers heterogeneity in BCS effects, with stronger impacts observed in underdeveloped regions and among vulnerable groups. These results highlight that targeted digital infrastructure initiatives like BCS can help reduce urban–rural income inequality and promote more inclusive economic growth.