Information and communication technology diffusion and the urban-rural income gap in China

The income gap between urban and rural households is a prevalent social issue in many countries, including China. This study examines the effect of information and communication technology (ICT) diffusion on the urban-rural income gap in China. We theoretically analyse how ICT infrastructure construction, financed by fiscal transfers, in rural areas narrows the rural-urban income gap. Further, our empirical results show that both ICT penetration at county level and ICT usage at household level narrow the rural-urban income gap. Moreover, compared to computer access, the newer generation of ICT devices (smartphones) has stronger effects in narrowing the rural-urban income gap. We find that smartphones play a key role in the reduction of this income gap by increasing the agricultural product operational income of rural households.