Does rural e-commerce drive up incomes for rural residents? Evidence from Taobao villages in China

The prosperity of rural e-commerce is crucial for rural economic development and rural residents’ well-being, it also offers a fresh perspective towards addressing the “Three Rural Issues” in China. Considering Taobao villages (rural e-commerce) as a quasi-natural experiment, this study explores the impact of Taobao villages on rural residents’ per capita disposable income by applying a staggered difference-in-difference (DID) method within county data from 2010 to 2020. It also reveals the underlying mechanisms behind them along with enterprise microdata. The empirical findings show that, on average, Taobao villages contribute to an annual increase of RMB 1820 in rural residents’ income, and this effect is more prominent in counties with a dominant tertiary sector, larger scale, and non-poor counties. Furthermore, three mechanisms of Taobao village income-raising effect exist: labor mobility across sectors, new business registration, and cost reduction in e-commerce firms. These findings provide compelling evidence for policymakers to promote rural e-commerce as a means to bolster rural residents’ income and foster rural economic growth, it is also of great practical significance for China in narrowing the urban–rural income gap.