Internet use and income gaps between rural and urban residents in China

Abstract

Using longitudinal survey data from the China Family Panel Studies, this study undertook a decomposition analysis to investigate the influences of differences in Internet access and return to Internet use on the income gap between rural and urban residents in China. Several major conclusions were drawn: First, there is a disparity in Internet access between rural and urban residents, with more Internet use among the latter. Second, while addressing the heterogeneity and other endogeneity problems simultaneously, the return to Internet use is higher for rural residents. Third, the disparity in Internet access widens the income gap, while differences in return to Internet use reduce income gap. Finally, the effects of Internet use on income gap differ by education and cohort, and the contribution values of return to Internet use on income gap are greater in the higher-educated group and younger generation than in their counterparts.

Keywords:

• Internet usage
• income gap
• rural and urban resident
• China

JEL CLASSIFICATION:

• J31
• J71
• O15

Acknowledgments

The authors are grateful to the editor, and anonymous reviewers for their helpful comments and suggestions, and Sho Komatsu (University of Tokyo) for his helps to construct a part of dataset.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Numerous empirical studies investigate the determinants of income gap between urban and rural workers based on the decomposition method. Ma (2018) offers a detailed review on the issue.

2 For detailed mathematical descriptions on these IV tests, please refer Green (2012) and Wooldridge (2016).

3 The constant term was omitted for convenience of descriptions. Regarding the index number problem, we conducted two decomposition analysis based on Eqs. (7) and (8); only one is listed because the tendency of these analysis results is similar. We also used the Oaxaca and Ransom (1994) model to employ the decomposition and the results were similar with those based on Blinder-Oaxaca’s (1973) model. For convenience and ease of understanding, we summarised the results based on Blinder-Oaxaca model. The results based on Oaxaca and Ransom (1994) are available upon request.

4 The mandatory retirement age in the public sector is 50 years for female workers, 55 years for female cadre, and 60 years for male workers and cadre.

5 Social insurance includes pension, medical insurance, unemployment insurance, maternity insurance, injury insurance and housing fund.

6 Yearly working hours is calculated as ‘weekly working hours × 48 weeks’.

7 Based on the human capital theory (Becker, 1964; Mincer, 1974), the years of schooling, years of work experience and its squared item were used as the indices of worker’ human capital. Years of working experience is calculated as ‘age-years of education’. As there is a correlation between the years of working experience and age, only the former was used in the analysis.

8 The low-education group included graduates of primary school and below; the middle-education group included graduates of junior high and senior high school; the high-education group included graduates of college and above.

Additional information

Funding

This research was supported by JSPS (Japan Society for the Promotion Science) KAKENHI: Grant-in-Aid for Scientific Research (B) from the Ministry of Education, Culture, Sports, Sciences and Technology (MEXT) Japan (Grant number: 20H01512).

Notes on contributors

Xinxin Ma

Dr. Xinxin MA is a professor at the Faculty of Economics, Hosei University, Japan. She was the editor of the Japanese Journal of Comparative Economics, Asian Studies, and the Journal of Chinese Economics in Japan. Her current research focuses on income inequality and labour market segmentation in China, Internet usage and its impact on labour market outcome in China. Her articles have appeared in peer-reviewed journals such as China Economic Review, Journal of Asian Economics, China & World Economy, Journal of Economics and Business and Economic Systems. Her recent books are Economic Transition and Labour Market Reform in China (2018, Palgrave Macmillan), Female Employment and Gender Gap in China (2021, Springer Nature) and Employment, Retirement and Lifestyle in Aging East Asia (ed. 2021, Palgrave Macmillan).