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

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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.

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Funding

The study was funded by the National Natural Science Foundation of China (NSFC71804206), and the Beijing Social Science Foundation Research Base Project (17JDYJB018), the National Social Science Fund of China (18AZD007), the Beijing Outstanding Young Scientist Program (BJJWZYJH01201910034034), the 111 Project (B20094), the Young Teachers Development Fund of Central University of Finance and Economics (QJJ1826), and the Program for Innovation Research in Central University of Finance and Economics. However, opinions expressed here do not reflect the funding agencies’ view. The authors thank the Editors and anonymous reviewers for their helpful comments and suggestions.

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Authors and Affiliations

  1. China Center for Internet Economy Research, Central University of Finance and Economics, Beijing, 100081, China

    Lei-Ju Qiu & Bao-Wen Sun

  2. School of Information, Central University of Finance and Economics, Beijing, 100081, China

    Shun-Bin Zhong

  3. Institute for Finance and Economics and Institute of Defence Economics and Management Central, University of Finance and Economics, Beijing, 100081, China

    Yu Song

  4. School of Insurance, Central University of Finance and Economics, Beijing, 100081, China

    Xiao-Hua Chen

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  1. Lei-Ju Qiu
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  3. Bao-Wen Sun
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  4. Yu Song
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  5. Xiao-Hua Chen
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Correspondence to Shun-Bin Zhong.

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Qiu, LJ., Zhong, SB., Sun, BW. et al. Is internet penetration narrowing the rural–urban income inequality? A cross-regional study of China. Qual Quant 55, 1795–1814 (2021). https://doi.org/10.1007/s11135-020-01081-8

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