Internet use and household debt in rural People’s Republic of China

Abstract

Internet adoption is accelerating in rural communities of developing countries. Although much attention has been devoted to the effects of Internet use on subjective well-being, income growth, poverty reduction, digital financial inclusion, and social connections in rural communities, little is known about how it affects their indebtedness. This paper fills this gap by investigating the association between Internet use and household debt in rural China. We use a conditional mixed process model and the instrumental-variable-based causal mediation framework to analyze the 2017 China Household Finance Survey data. The results show that Internet use and household debt are positively associated: household debt is 5,370 yuan higher amongst Internet users than non-users in rural China. Using the Internet increases household debt through its effects on consumption expenditure and investment spending. That the Internet will become ubiquitous in rural communities is inevitable. Our findings highlight the importance of proactive interventions to educate rural communities on the potential pitfalls of using the Internet and set them up gainfully leverage this technology.