2019 Conference

Internet Usage, Consumption inequality, Urban-rural disparities

With the severe disparity issue and advance in internet technology, this study focuses on whether internet usage impacts on urban-rural consumption inequality in China. In rural area, the lack of competition causes fewer varieties and higher prices of products in physical stores. Through internet, information and quantities of products are available now for rural consumers. Since urban consumers always enjoy more choices and lower prices before e-commerce’s popularization, it is hypothesized that internet usage will benefit rural consumers more and reduce consumption inequality. In this study, the Theil index is used to measure urban-rural consumption inequality. Based on the county level data from the China Family Panel Study, results show that: (1) internet usage has a significant negative effect on urban-rural consumption inequality, which may increase consumer welfare in rural area; (2) Compared to higher income groups, internet usage has stronger impacts on consumption inequality among low-income groups. Alternative measures of internet usage are applied for robustness tests. The great benefit for rural and low-income customers shed light on the development of internet. Policies should be made to support the development of e-commerce platform in rural areas, such as speeding up the construction of high-speed broadband network and reducing related fees to benefit consumers there.