Is internet penetration narrowing the rural–urban income inequality? A cross-regional study of China

Leiju Qiu, Shun-Bin Zhong (), Bao-Wen Sun (), Yu Song () and Xiao-Hua Chen ()
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Shun-Bin Zhong: Central University of Finance and Economics
Bao-Wen Sun: Central University of Finance and Economics
Yu Song: University of Finance and Economics
Xiao-Hua Chen: Central University of Finance and Economics

Quality & Quantity: International Journal of Methodology, 2021, vol. 55, issue 5, No 12, 1795-1814

Abstract: Abstract Internet penetration (NET) brings new opportunities as well as challenges to countries all over the world. It can narrow the rural–urban income inequality (RUI), because it increases the connections of rural areas to the urban areas from both the production side and consumption side. It can also enlarge the RUI, because the internet may be skill-biased. Meanwhile, income level and the RUI may lead to different local internet development. However, the relationship between NET and RUI remains unclarified. This study applies the method of bootstrap panel Granger causality to explore the causal relationship between NET and RUI. The estimation results show that the causal relationship between NET and RUI varies across different provinces and regions, which is in line with the hypothesis of the inverted U-shaped technological Kuznets curve (TKC). Specifically, the NET does Granger-cause RUI in two-fifths of China’s provinces, primarily in North China and East China, while RUI does not Granger-cause NET in China since the NET itself is largely dependent on government policies. Therefore, policymakers should develop fair internet development policies targeting the improvement of rural and urban income distribution.

Keywords: Internet penetration; Rural–urban income inequality; Technological kuznets curve; Bootstrap panel granger causality (search for similar items in EconPapers)
JEL-codes: C1 E2 J3 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s11135-020-01081-8

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