Impact of Digital Economy on Living Standards and Equality in Rural and Urban Areas of China

Digital economy is one the most crucial phenomena of the 21st century affecting social and economic development indicators such as income levels and equality. This study aims to investigate how digital economy impacts urban-rural income levels and equality in China. This study employs a fixed effects model to estimate this relationship from 2011 to 2020 in the whole urban and rural areas as well as in the western, central, and eastern regions of China. The results show a positive relationship between the digital economy and living standards in urban and rural regions. In addition, the results reveal that the digital economy narrows the rural-urban gap since this effect is more considerable in rural areas than the urban ones. More specifically, the findings indicate that the digital economy improves equality among various rural areas, due to its higher impact on the western rural area which is the least-developed region in China. Therefore, digitalization improves both social and economic development indicators like living standards and equality. The findings of this research suggest policymakers develop digital structures, especially in rural and less-developed areas particularly the western region, to not only improve equality in these specific areas but also increase economic activities throughout the region.