Internet use and consumption diversity: Evidence from rural China

• Published date: 01 August 2023
• Author: Puneet Vatsa,Junpeng Li,Phong Quoc Luu,Julio Cesar Botero‐R
• Date: 01 August 2023
• DOI: http://doi.org/10.1111/rode.12935

SPECIAL ISSUE ARTICLE

Internet use and consumption diversity:

Evidence from rural China

Puneet Vatsa

1

| Junpeng Li

2

| Phong Quoc Luu

3

|

Julio Cesar Botero-R

1

1

Department of Global Value Chains and

Trade, Faculty of Agribusiness and

Commerce, Lincoln University,

Christchurch, New Zealand

2

School of Economics and Management,

Huaiyin Normal University, Huai'an,

China

3

Department of Financial and Business

Systems, Faculty of Agribusiness and

Commerce, Lincoln University,

Christchurch, New Zealand

Correspondence

Junpeng Li, School of Economics and

Management, Huaiyin Normal

University, Huai'an 223301, China.

Email: ljp549@163.com

Funding information

Jiangsu Provincial Department of

Education, Grant/Award Number:

2020SJA1763; National Natural Science

Foundation of China, Grant/Award

Number: 72103075

Abstract

The Internet is integral to modern living. While the

Internet is ubiquitous in China's urban areas, its uptake

is still lagging in the country's rural regions—the devel-

opment potential of the Internet remains untapped, and

despite China's steep economic growth during the 21st

century, the living standards in its rural regions remain

low. The Internet can accelerate rural development in

China. This study is focused on analyzing whether and

to what extent Internet use affects consumption diver-

sity, an indicator of the quality of life, in rural China. To

this end, we employ the instrumental-variable-based

two-stage endogenous treatment regression model to

analyze the 2018 China Family Panel Studies survey

data. The modeling approach allows us to account for

the endogeneity of Internet use. The results show that

consumption diversity is positively associated with Inter-

net use. Furthermore, it rises with household income,

household size, and wealth. Whether the Internet is

accessed via smartphones or computers has no bear-

ing on household consumption diversity. We also

find that education, household income, and wealth

increase one's predicted probability of using the Inter-

net. The results also point to regional differences in

consumption diversity and the likelihood of using the

Internet.

Received: 2 May 2022 Revised: 28 August 2022 Accepted: 29 August 2022

DOI: 10.1111/rode.12935

Rev Dev Econ. 2023;27:1287–1308. wileyonlinelibrary.com/journal/rode © 2022 John Wiley & Sons Ltd. 1287

KEYWORDS

China, consumption diversity, endogenous treatment

regression, Internet use

JEL CLASSIFICATION

C21, D12, O33, R11

1|INTRODUCTION

With more than 70% of China's population using the Internet, China was home to more than

1 billion Internet users in 2020 (World Bank, 2022). That the number increased from 765 million in

2017 shows how quickly Internet adoption has grown in the country. Consequently, China is catch-

ing up fast with the developed world. In 2013, there were 30.4 broadband subscriptions per 100 peo-

ple in the United States compared to only 13.6 inChina.In2019,whilethenumberincreasedto

34.7 for the United States, it rose to 31.3 for China (Roser, Ritchie, & Ortiz-Ospina, 2015).

According to the 2021 United Nations Department of Economic and Social Affairs World

Social Report, the developmental potential of Internet access exceeds that of urban migration

(United Nations, 2021). Because four out of every five abjectly poor people live in rural areas,

providing them access to the Internet is crucial to improving their quality of life—the Internet

facilitates communication, connecting markets and people; it is a source of entertainment and a

vehicle for education, information, and knowledge; it is indispensable to modern living.

The government of China is committed to using the Internet to fuel economic growth and

improve the standard of living in the country. The poor spend considerable proportions of their

income to satisfy their physiological needs essential for survival (Gelman, 2021; Jappelli &

Pistaferri, 2014; Parker, 2017). The food itself accounts for 50%–78% of their overall expenditure

(Banerjee & Duflo, 2007; Chisanga & Zulu-Mbata, 2018; Jayasinghe & Smith, 2021; Kassahun,

Tessema, & Adbib, 2022). However, as people escape poverty, become more aware of products

and services, and gain access to markets and finance, their share of consumption expenditure

on life's necessities decreases, and their focus shifts to fulfilling higher-level self-actualization

needs (Clements, Wu, & Zhang, 2006; Dang & Viet Nguyen, 2021; Kumar, 2016), naturally lead-

ing to greater consumption diversity (Chakrabarty & Mukherjee, 2021; Firdaus, Anwar,

Khomsan, & Ashari, 2021). Considering the growth of Internet adoption and the eradication of

extreme poverty in China, this study is focused on analyzing the role of Internet use on

consumption diversification.

The increasing significance of non-farm employment in rural areas has prompted a substan-

tial body of research investigating its effects on various consumption categories: farm inputs

(Ma, Abdulai, & Ma, 2018; Zheng, Ma, Guo, & Zhou, 2021), energy (Ma, Zhou, &

Renwick, 2019; Martey, Etwire, Adusah-Poku, & Akoto, 2022), and food (Duong, Thanh, &

Ancev, 2021; Liu, Renwick, & Fu, 2019). For example, noting that off-farm income increases

electricity and gas consumption but decreases that of coal, Ma et al. (2019) concluded that off-

farm income promotes energy transition in rural China. Duong et al. (2021) found that off-farm

employment increases income and food security, thus helping alleviate poverty in rural

Vietnam. Others have reported a positive link between financial inclusion and consumption

diversity of non-food items (Chakrabarty & Mukherjee, 2021). Using a multi-country analysis of

consumption diversity, Clements et al. (2006) showed that it has a positive income elasticity.

1288 VATSA ET AL.