How Does Internet Infrastructure Construction Affect Urban-Rural Income Gap? Evidence from a Quasi-Natural Experiment in China

Internet infrastructure, like other infrastructures, is gradually becoming an important force affecting economic and social development, laying the foundation for the development of the digital economy. Based on a quasi-natural experiment, combined with the data of 201 Chinese prefectures from 2010 to 2018, this study constructs a difference-in-differences approach to examine the impact of internet infrastructure construction (IIC) on the urban-rural income gap. The main results show that IIC has a significant widening effect on the urban-rural income gap. Our study also finds that the effect has significant location and city attribute heterogeneity. Specifically, the IIC widens the urban-rural income gap more strongly in central-western, inland, provincial capital and small-scale cities. Furthermore, the promotion of IIC to the income of urban residents far exceeds that of rural residents, which is a typical manifestation of the third-level digital divide. However, increasing the education level of residents is beneficial to alleviating the widening effect of IIC on the urban-rural income gap. Overall, national policymakers should pay attention to the possible inequalities in promoting the development of national broadband internet. Policies for improving the digital application abilities of residents, especially vulnerable groups, are highly recommended to share the digital dividend.