Broadband internet and income inequality among the floating population: Evidence from the “broadband China” strategy in China

Abstract

Using the “Broadband China” strategy as a quasi-natural experiment, we employ the difference-in-differences model to examine the impact of broadband internet on the income inequality among the floating population based on the panel data of 35 major cities in China from 2011 to 2018. We find that broadband internet significantly widens the income inequality among the floating population. This conclusion still holds after robust tests including parallel trends, placebo, endogeneity, and treatment effects heterogeneity. The mechanism analysis indicates that broadband internet widens income gap between the high-skilled and low-skilled floating population, as well as between the urban and non-urban registered household floating population, but does not substitute for labor. Further analysis shows that broadband internet leads to skill-biased technological progress rather than routine-biased technological progress, has a greater effect on widening the income inequality among the inter-province, established and young floating population, and represents a Pareto improvement for the floating population's welfare.