Does network infrastructure construction reduce urban–rural income inequality? Based on the “Broadband China” policy

• Published in: Technological forecasting & social change 2024-08, Vol.205, p.123486, Article 123486
• Main Authors: Li, Xitong, He, Peiming, Liao, Honglin, Liu, Jindan, Chen, Litai
• Format: Article
• Language: English
• Subjects: Broadband China policy; Network infrastructure construction; Time–varying DID; Urban–rural income inequality
• ISSN: 0040-1625; 1873-5509
• DOI: 10.1016/j.techfore.2024.123486

Network infrastructure is one of the most significant technological developments in recent decades, as well as a powerful boost for economic growth in both urban and rural area. However, whether improving network infrastructure reduces urban-rural income inequality (URII) remains uncertain in the previous literature. Considering that URII is an important research issue in the field of social change, it is worthwhile to investigate the causal relationship between network infrastructure and URII. Based on the exogenous shock from a quasi-natural experiment of “Broadband China” demonstration cities, this paper utilizes a time-varying Difference-in-Differences (Time-varying DID) model to identify the causal impact of the improvement of network infrastructure on URII in China. The results show that: (1) After controlling the impact of other commonly acknowledged factors, network infrastructure remains a significant factor in URII reduction. (2) The mechanism analysis confirms that the mediating effect of digital financial inclusion plays a vital role in the impact of network infrastructure on URII. (3) Further regional heterogeneity analysis reveals that the impact of network infrastructure on reducing URII also relies on region's characteristics, such as geographical location, traditional infrastructure level, and administrative level. This paper has figured out the causal relationship between network infrastructure and URII, thus inspiring policy-makers who aim to reduce inequality between urban and rural areas to commit to improving network infrastructure with an emphasis on digital financial inclusion mechanism and comprehensive consideration of regional heterogeneity. •Network infrastructure construction can significantly reduce urban-rural income inequality.•Time-varying Difference in difference method (Time-varying DID) was adopted to investigate the “Broadband China” Policy.•The mediating mechanisms and heterogeneity of network infrastructure development on urban income inequality are discussed.•The value of the “Broadband China” Policy for urban-rural development is shown.•Our findings offer advice for developing countries and local governments.