E-Commerce Integration and Economic Development: Evidence from China

Victor Couture, Benjamin Faber, Yizhen Gu, Lizhi Liu

NBER Working Paper No. 24384
Issued in March 2018, Revised in August 2018
NBER Program(s):Development Economics, International Trade and Investment, Productivity, Innovation, and Entrepreneurship

E-commerce markets are rapidly growing in the developing world, but this growth has until recently been limited to urban areas. Inspired by growth in cities and numerous case studies on the transformative effect of e-commerce trading on rural markets, policy makers are now targeting large investments to expand access to e-commerce outside of cities. In this paper, we investigate the effect of the first nationwide e-commerce expansion program on household welfare and the underlying channels at work. The program invests in the necessary logistics to ship products to and sell products from tens of thousands of Chinese villages that were largely unconnected to e-commerce. Our analysis combines a new collection of survey and administrative microdata with a randomized control trial (RCT) that we implement across villages in collaboration with a large e-commerce firm. We find that the gains from e-commerce trading are sizable, but only accrue to a minority of rural households who tend to be younger and richer. In contrast to the existing case study evidence that has motivated these policies, we find little evidence for significant income gains to the average rural producer or worker. Instead, the gains are driven by the consumption side, through a significant reduction in household cost of living that is most pronounced in more remote rural markets. Our results also suggest that these effects are mainly due to overcoming the logistical barriers to e-commerce in rural markets, rather than to additional investments targeted at adapting e-commerce to the rural population.

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Document Object Identifier (DOI): 10.3386/w24384

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