Internet usage and rural self-employment in China

Abstract

With the rapid development of information technology, the internet has penetrated rural China. In this article I examine the impact of internet usage on rural self-employment and investigate its major channels. Employing a semiparametric bivariate probit model, the research finds that internet usage significantly increases the probability of rural self-employment by 5 to 7 percentage points. Further evidence points to the significant impact of internet usage on male, older, and better educated rural laborers, whereas such an effect on female, younger, and less educated laborers is not remarkable. Channel investigation reveals that internet usage encourages rural self-employment by weakening financial constraints, lessening social capital restrictions, and reducing transaction costs.