Does e-commerce narrow the urban–rural income gap? Evidence from Chinese provinces

Abstract

Purpose: A wide urban–rural income gap exists in China despite the implementation of pro-rural policies. Additionally, with the proliferation of the internet and information technology, the promotion effect of e-commerce on the economy has become apparent. Accordingly, China has been actively encouraging rural households to participate in e-commerce activities. This study aims to examine the effect of e-commerce on the urban–rural income gap. Design/methodology/approach: In the study, linear and panel threshold models were applied to provincial-level panel data from 2002 to 2018. Findings: The results of the linear model show that e-commerce contributes to narrowing the urban–rural income gap. Moreover, the panel threshold model results show that the narrowing effect exists in regions where the e-commerce intensity is at a medium-to-high level and urbanization is at a relatively low level; otherwise, e-commerce has no effect. In addition, in regions with a relatively high level of public expenditure and education, the income-gap-narrowing effect of e-commerce is more than double. Practical implications: The urban–rural income gap can be reduced by promoting e-commerce and reducing the urban–rural divide in e-commerce use. Originality/value: To determine how varying levels of e-commerce development affect the urban–rural income gap across regions, the study proposes four key causes of the digital divide in e-commerce: e-commerce intensity, public expenditure level, urbanization level and education level and applies the variables as threshold variables to examine the non-linear effect of e-commerce on the income gap.