Rural digital infrastructure and labor market: Evidence from universal telecommunication service

• Published date: 01 September 2023
• Author: Qing Wang,Xingyu Xia,Sai Lan,Miao Li
• Date: 01 September 2023
• DOI: http://doi.org/10.1111/asej.12306

ORIGINAL ARTICLE

Rural digital infrastructure and labor market: Evidence

from universal telecommunication service

Qing Wang

1

|Xingyu Xia

2

|Sai Lan

3

|Miao Li

1

1

International School of Business & Finance, Sun Yat-sen University, Zhuhai, China

2

China Center for Special Economic Zone Research, Shenzhen University, Shenzhen, China

3

Emlyon Business School, Shanghai, China

Correspondence

Qing Wang, International School of Business and Finance, Sun Yat-sen University, Zhuhai, China.

Email: wangq577@mail.sysu.edu.cn

Funding information

National Natural Science Foundation of China, Grant/Award Number: 71903007; Humanities and SocialSciences

Program of the Ministry of Education, Grant/Award Number: 22JJD790054

Abstract

This study estimates the effects of the rapid expansion of digital infrastructure on rural

employment and income. We use a triple-difference framework and exploit the geo-

graphic variation of the recent universal telecommunication service in China. Empirical

results reveal increased broadband adoption after the implementation of the program

with governmental subsidy. The universal telecommunication service led to an increase in

rural residents’income and their employment in the non-agricultural sector, especially

salaried work. The findings suggest that digital infrastructure promotes the transforma-

tion of the rural economy in emerging markets.

KEYWORDS

digital divide, employment, regional development, rural economy, telecommunication infrastructure

JEL CLASSIFICATION

O14, O33, R23

1|INTRODUCTION

The rapid development of modern telecommunication technology creates a

“digital divide,”leading to regional gaps in growth and development. China

has experienced a significant digital divide between urban and rural areas in

DOI: 10.1111/asej.12306

© 2023 East Asian Economic Association and John Wiley & Sons Australia, Ltd.

Received: 25 July 2022; Accepted: 16 August 2023

Asian Econ. J. 2023;37:293–325. wileyonlinelibrary.com/journal/asej 293

thepast.Until2015,approximately50 000administrativevillagesinChina,

including numerous poverty-stricken villages, did not have access to broadband

internet.Approximately150 000administrativevillageshadpoorbroadband

access capacity of less than 4 Mbps.

1

Most of these administrative villages are

remote. Moreover, the construction cost of digital infrastructure is relatively

high because of the scattered distribution of potential subscribers. The high cost,

low consumption capacity, and externality of digital infrastructure result in the

failure of the market mechanism. A universal telecommunication service and

governmental subsidy are regarded as solutions for this digital divide.

2

The goal

of a universal telecommunication service is the promotion of the availability,

accessibility, and affordability of information and communication technology

(ICT). Early universal telecommunication services primarily focused on tele-

phone access, including fixed lines and mobile telephony. Later programs

expanded the original goal and incorporated access to both telecommunications

and advanced services, such as high-speed internet to all consumers at afford-

able rates.

In 2015, China launched a similar plan of digital inclusion in rural areas and

implemented a pilot program of universal telecommunication service for the fol-

lowing six consecutive years. The program successively supported the construc-

tion ofan optical fibernetworks in130 000 administrativevillagesand 50 000

rural 4G base stations with the support of the government and telecommunica-

tion enterprises. One-third of pilot villages are located in poverty-stricken areas.

By the end of 2020, approximately 99% of administrative villages are equipped

with fiber optic communication network infrastructure and 4G base stations.

The average download speed of optical fiber in pilot villages exceeded 70 Mbps,

basically realizing the goal of “same network and same speed”nationwide and

eliminating the long-lasting rural–urban divide in digital infrastructure. This

study evaluates the effects of such a rapid and large-scale expansion of digital

infrastructure on rural employment and income.

Many studies provide evidence of digital connectivity from developing coun-

tries (Van Gaasbeck, 2008; Atasoy, 2013). Additionally, several scholars have

highlighted the distributional effects of digital infrastructure by increasing the

income of disadvantaged groups, reducing poverty, and promoting social inclu-

sion (Medeiros et al., 2021). However, the causal evidence on digital infrastruc-

ture and rural employment and development is relatively scant compared to

that on urban areas (Qiu et al., 2021). Exceptions include Zhou and Li (2017),

Zhou et al. (2020), and Leng (2022), who have focused on rural China.

1

Mbps stands for megabits per second, a transmission rate unit that refers to the number of bits transmitted per

second, and 1 Mbps =0.125 MB/s (ISO/IEC80000).

2

According to the World Bank (October 10, 2021), the universal telecommunication service focuses on the

provision of mobile connectivity and broadband to individuals and premises https://ppp.worldbank.org/public-

private-partnership/sector/telecom/laws-regulations/universal-access.

294 WANG ET AL.

The current study differs from the studies by Zhou and Li (2017) and

Zhou et al. (2020) in that it first explores a recent large-scale universal telecom-

munication service program for model identification and its implication for

the rural labor market and economic transition. The previous two studies

have examined the relationship between the personal internet usage of rural

residents and their employment and income in rural China using a conven-

tional instrumental variable approach. Similar to Leng (2022), ours is one of

the first studies to explore the recent application of the “Broadband China”

strategy for empirical identification. Leng (2022) examined the employment

effects of the “broadband China pilot city program”in rural areas. In con-

trast, we investigate the universal telecommunication service program, which

aims to improve the broadband infrastructure in rural areas, especially

remote rural areas. To the best of our knowledge, these two programs are

conducted differently, even though both are under the design of the “Broad-

band China”strategy.

In this study, we use a triple-difference framework and exploit the geo-

graphic variation of the policy as well as the pretreatment foundation of tele-

communication for model identification. We find an increase in broadband

adoption as a result of the program. The provision of universal telecommunica-

tion services also increases rural residents’income and their employment in the

non-agricultural employment sector, especially salaried work. The findings

imply that digital infrastructure assists the rural economic transition in China.

The article proceeds as follows. Section 2presents the literature review and

background. Section 3discusses the dataset and empirical strategy. Section 4

presents the estimation results, and Section 5concludes.

2|LITERATURE REVIEW AND BACKGROUND

2.1 |Digital infrastructure and labor market

The significance of digital infrastructure in all aspects of human life and social

production has attracted immense academic attention. The requirement for digi-

tal infrastructure has arisen in response to the rapid growth of the new genera-

tion of ICT, which encompasses a wide range of devices such as mobile phones,

computers, network hardware, and related services and applications. Most rele-

vant studies have not sufficiently differentiated the terms “ICT”and “broadband

infrastructure.”They have used broadband infrastructure as the representative

term to show the positive effect on the size of employment and economic

growth. For example, Van Gaasbeck (2008) demonstrated that increased broad-

band use in California has a positive and significant impact on the growth in

employment and total payroll. Evangelista et al. (2014) built a digital composite

index for European countries and suggested that ICT infrastructure is associated

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