Does digital infrastructure exacerbate income inequality? Evidence from the Broadband China Strategy

Abstract

As an important initiative to advance digital infrastructure, implementing the Broadband China Strategy (BCS) has substantially impacted urban income inequality. This paper employs a staggered difference-in-differences model to examine the effects of BCS on income inequality, revealing a 1.95 % decrease in income inequality in pilot cities compared to non-pilot cities. The mechanism analysis indicates that the BCS affects income inequality through skill-biased technical progress and shifts in the labor skill structure, with the latter playing a dominant role. Heterogeneity analysis indicates the reduction in income inequality is more pronounced in eastern regions, large cities, non-resource-based economies, newer industrial bases, as well as cities experiencing low-skill-biased technical progress and rapid updates to labor skill structures. Additionally, a spatial Durbin model further identifies the significant spatial spillover effects of the BCS on income inequality.