Income effect of rural E-commerce: Empirical evidence from Taobao villages in China

Rural E-commerce (EC) has experienced rapid growth in China since 21st century. The formation of Taobao Villages has brought considerable economic and social benefits in farmers' flexible employment and poverty reduction, which contributes to the future development direction of rural and underdeveloped areas. Adopting the panel data of Taobao Villages (TB-villages) in 57 counties of Zhejiang Province from 2010 to 2018, this paper applies the continuous difference-in-differences (DID) method to investigate the impact and mechanism of TB-villages on rural residents' incomes. As a result of empirical analysis, TB-villages significantly and positively affect rural residents' incomes. More specifically, per capita net income will increase by 3.6% for every 1% increase in the proportion of TB-villages in administrative villages. In mountainous counties, the income-increasing effect is considerably higher than that of non-mountainous counties. Furthermore, the mechanism analysis reveals that the industry structure has a considerable mediating effect, and the proportion of export to GDP has a significant suppressing effect. Local governments are expected to increase investment in industry structure and create a more conducive environment for rural economic development, according to this paper. Additionally, the policy should be oriented toward mountainous and backward areas. •Taobao Villages substantially increase rural residents' incomes.•Taobao Villages have a higher income increasing effect in mountainous counties.•Industry structure has a considerable mediating effect, while exports exhibit a substantial suppressing effect.