Road to prosperity: How urban-rural transportation integration drives rural household consumption growth

Abstract

Using a quasi-natural experiment of the Urban-Rural Transportation Integration Demonstration County (UTIDC) policy, we investigated the causal impact of urban-rural transportation integration (UTI) constructions on rural household consumption in China. Within a Difference-in-Differences (DID) framework, we revealed the consumption-enhancing effect of UTI constructions. Specifically, compared to rural households in non-UTIDCs, those in UTIDCs saw an average increase in annual per capita consumption of approximately 3592 yuan, representing an increase of 36.58%. The baseline DID results are supported by rigorous robustness checks, including spillover effect tests, placebo tests, and alternative specifications. We further explored the potential mechanisms both from the supply and demand sides, finding that this positive effect may be explained by the alleviation of market segmentation, income growth, and increased leisure time. Additionally, UTI constructions improve consumption structure and reduce consumption inequality in rural China, particularly benefiting some vulnerable groups. Our findings also indicate that there is a synergy between e-commerce development and UTI constructions to stimulate rural household consumption. Our study complements the research field on the welfare effect of transportation infrastructure and provides insights into how to promote rural consumption by UTI constructions in developing countries.