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

Abstract 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.