Digital transformation in rural governance: unraveling the micro-mechanisms and the role of government subsidies

Abstract The integration of digital technology into rural governance has reshaped the governance model, providing new opportunities for promoting digital rural governance. However, the empowering role of digital technology in rural governance has not yet been fully realized, and digital rural governance still faces many challenges. This paper, based on the assumption of bounded rationality, constructs a dynamic evolutionary game model involving three parties: local governments, village collectives, and villagers. By incorporating system dynamics for numerical simulation, it explores in depth the strategic choices of three parties under different scenarios. The study finds that under certain conditions, there exists an equilibrium strategy that satisfies the interests of local governments, village collectives, and villagers. Government subsidies are an important external factor influencing the strategic choices of village collectives and villagers, but excessively high subsidies can increase local governments’ fiscal burden. Digital literacy is an internal driving factor that ensures village collectives and villagers participate in digital rural governance. In the long term, even with reduced or entirely absent government subsidies, higher digital literacy can effectively achieve rural digital governance. This paper helps in comprehensively understanding the micro-level mechanisms of rural digital governance, providing a theoretical basis for optimizing the incentive policy system and promoting rural digital governance. It also offers a new perspective on how to advance digital rural governance in the absence of government subsidies.