Impact of Internet use on economic well‐being of rural households: Evidence from China

• Date: 01 May 2020
• DOI: http://doi.org/10.1111/rode.12645
• Published date: 01 May 2020
• Author: Wanglin Ma,Peng Nie,Pei Zhang,Alan Renwick

Rev Dev Econ. 2020;24:503–523. wileyonlinelibrary.com/journal/rode

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503

© 2020 John Wiley & Sons Ltd

Received: 27 September 2019

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Revised: 19 December 2019

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Accepted: 19 December 2019

DOI: 10.1111/rode.12645

REGULAR ARTICLE

Impact of Internet use on economic well-being of

rural households: Evidence from China

WanglinMa1

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PengNie2

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PeiZhang3,4

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AlanRenwick1

1Department of Global Value Chains

and Trade, Faculty of Agribusiness

and Commerce, Lincoln University,

Christchurch, New Zealand

2School of Economics and Finance, Xi’an

Jiaotong University, Xi’an, China

3Institutes of Science and Development,

Chinese Academy of Sciences, Beijing,

China

4University of Chinese Academy of

Sciences, Beijing, China

Correspondence

Pei Zhang, Institutes of Science and

Development, Chinese Academy of

Sciences, University of Chinese Academy

of Sciences, Beijing 100049, China.

Email: pei_zhang@126.com

Funding information

Lincoln University Seed Fund Project,

Grant/Award Number: INT5063; Lincoln

University, Grant/Award Number: INT5063

Abstract

The expansion of the Internet in developing countries has

important implications for the economic development of

rural areas. Although many studies have investigated vari-

ous benefits of Internet use, little attention has been paid to

find the relationship between Internet use and the economic

well-being of rural households. This paper, therefore, in-

vestigates the effects of Internet use on household income

and expenditure, using a sample of rural households from

China. Both endogenous treatment regression (ETR) and

unconditional quantile regression (UQR) techniques are

used to identify the homogenous and heterogeneous effects

of Internet use, respectively. The ETR results show that

Internet use increases household income and expenditure

significantly. However, the UQR results reveal that Internet

use has a larger impact at the upper distributions of house-

hold income and expenditure.

KEYWORDS

endogenous treatment regression, household expenditure, household

income, Internet use, unconditional quantile regression

JEL CLASSIFICATION

D60; O18; L86

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INTRODUCTION

Information and communication technologies (ICTs) facilitate information transfer, and, therefore,

they are regarded important production factors for productivity gains and economic growth. Research

on rural areas has shown that the adoption of ICTs, in particular, mobile phones and computers,

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MA et Al.

has significant impacts on transaction costs and market participation (Tadesse & Bahiigwa, 2015;

Zanello, 2012), agricultural technologies (Fu & Akter, 2016), farm efficiency and productivity (Lio

& Liu, 2006; Ogutu, Okello, & Otieno, 2014), and rural economic development (Hübler & Hartje,

2016; Ma, Grafton, & Renwick, 2018; Munyegera & Matsumoto, 2018).

Compared with the adoption of ICTs, access to broadband Internet services enables households

to use various ICTs, such as smartphones, computers, and tablets, through wireless Internet access.

It also enables them to access various ICTs at the same time. Thus, broadband Internet networks are

viewed as a strategic public infrastructure to facilitate economic and social development in the new

era and have been widely promoted through different telecommunication policies in the developing

setting.

Several studies have investigated the impact of Internet use/access on household income. For ex-

ample, Chang and Just (2009) found that Internet access increased farm household income in Taiwan

(province of China). This observation was echoed by Chang, Lambert, and Mishra (2008), who showed

that access to the Internet has a positive and significant impact on household income and off-farm

income of small-farm businesses in the United States. Internet access can affect resource allocation of

farm households and facilitate business management and marketing promotion, thereby improving the

economic well-being of households. In addition, Internet access may affect the consumption patterns

of households (Hitt & Tambe, 2007; Mishra, Williams, & Detre, 2009). Interestingly, Mishra et al.

(2009) found that with increasing distances to markets, farm business and households are more likely

to purchase a higher percentage of nondurable goods (e.g., groceries) through the Internet. However,

the impact of Internet use on household expenditure has been understudied. Furthermore, Internet

use may affect rural households at the upper and lower levels of household income and expenditure

distributions differently because Internet use may influence capital accumulation and resource alloca-

tion differently between rich and poor households. However, to the best of our knowledge, potential

heterogeneous effects of Internet use on the well-being of households remain understudied.

The aim of this study is, thus, to examine how Internet use affects the economic well-being of

rural households in China. Rural China represents a particularly interesting case among developing

countries because, with the rapid development of informationization construction, the Internet access

conditions in rural China have improved (featured as more high-quality hardware devices) (CNNIC,

2017). In 2013, China’s State Council issued the “Broadband China” strategy along with an imple-

mentation plan to popularize broadband networks nationwide, with the aim of achieving Internet cov-

erage in all urban and rural areas by 2020. However, the rate of Internet use remains quite low in rural

areas. Up to December 2016, approximately 731 million Chinese were using the Internet, but only 201

million of them (27%) were rural netizens. Therefore, understanding the determinants of rural house-

holds’ decisions to use the Internet and how this technology impacts the economic well-being of rural

households can provide significant insights into the designing of national strategy for the development

of information society.

We contribute to the existing literature in several ways. First, we investigate the determinants of

Internet use of rural households. Although a large number of studies have examined the factors that

affect Internet use, most of them focused on households in developed countries or urban households

in developing countries (e.g., Colombo, Croce, & Grilli, 2013; Oh, Ahn, & Kim, 2003). Consequently,

these findings are difficult to be generalized because different countries or regions (e.g., rural versus

urban) vary in socioeconomic characteristics and information infrastructures. Second, we attempt

to explore the impact of Internet use on the economic well-being of rural households, measured by

both household income and expenditure. Extant studies have mostly focused on household income or

purchasing patterns of farm households due to the benefits associated with Internet use (e.g., Chang

& Just, 2009; Hitt & Tambe, 2007; Mishra et al., 2009), but we focus on both household income and