Assessing the Impact of China's Broadband Village Pilot Project on the Consumption Patterns of Rural Households

Abstract

Given that rural areas are home to approximately half of China's population, it is essential to assess the economic impact of the country's substantial investment in broadband infrastructure in these regions. We use the ‘Broadband Village’ pilot project launched in western China in 2014 as an exogenous shock to estimate the link between better high‐speed internet infrastructure and rural consumption. We rely on data on rural households from the China Household Finance Survey and a difference‐in‐differences model to assess the impact of the Broadband Village initiative on household consumption patterns. Our results suggest that the program's launch has led to higher spending on both basic needs and non‐essential items, helping to boost rural consumption and indirectly promote economic growth in China's western regions. We also find that the pilot's role in stimulating consumption is moderated by the degree of attention to information, and that it has disproportionately benefited younger consumers and households with significant liquidity constraints. Our analysis underscores the importance of encouraging further development of internet‐based sales models and considering the broader socio‐economic context when designing policies to promote growth by stimulating consumption.