Does Internet development affect urban-rural income gap in China? An empirical investigation at provincial level

Abstract

This study aims to examine the impact of Internet development on the urban-rural income gap in China. By using a provincial level panel dataset comprising 31 of China’s provinces, it analyzes and compares the effects of the eastern, central, and western regions over the period of 2005–2016. The results show that Internet development aggravates the gap in the central region much more than that in the eastern and western regions. The trade openness expands the urban-rural income gap only in the eastern region. Urbanization reduces the urban-rural income gap in the western region more than that in the eastern and central regions. Additionally, the regional economic development level also reduces the urban-rural income gap in central region more than that in the eastern region. FDI reduces the urban-rural income gap only in the central region. Additionally, while the urban-rural income gap can widen further by Internet development with trade openness, it can be decreased if Internet development is combined with FDI and urbanization. To reduce urban-rural income gap, the government should accelerate the construction of Internet according to regional differences.