Essays on e-commerce development in rural China

Abstract

This thesis consists of two essays on E-commerce development in rural China. In the first chapter, I evaluate the role of technology innovation in fostering inclusive growth by using one of the remarkable developing trends in the digital economy, the sweeping E-commerce expansion from urban to rural and the resulting emergence of Taobao Villages. I exploit monthly real-time online transaction data from Taobao, the largest and most representative E-commerce platform in China, and explore the effects of the formation of Taobao Villages on the rural economy. My findings suggest that the emergence and growth of clustered rural online business significantly contribute to local E-commerce development, attracting more individual entrepreneurs, female entrepreneurs and mature entrepreneurs to embrace the internet economy and engage in E-business. Rural entrepreneurs can achieve higher returns from the economics of agglomeration, which further promotes the transformation and upgrading of the economy towards a more formalized operation. As to the mechanisms, I find that local conditions of infrastructure construction and level of marketization are two fundamental driving forces for rural E-commerce development, consistent with economic intuitions and practical experiences. Finally, I find that the effects are more pronounced in areas with lower level of economic development, evidence of an inclusive growth pattern created by E-commerce and the sharing of development fruits in an equitable way. In the first chapter, I find that Taobao Villages significantly encourage more rural E-tailors to engage in E-commerce. Then I probe into their entrepreneurial performance and the underlying motivations in more detail in the second chapter. I exploit granular monthly E-shop level data from the online transaction platform Taobao, and find that the clusters of rural E-commerce effectively attract more customers and create higher online sales and purchase orders, implying the economics of agglomeration. Rural entrepreneurs can achieve more sales from their customer base and each deal. Digging into the underlying channels, I find that the effects are not simply driven by increasing visitors or page views, and online shops achieve higher sales and extract more profits from a stable level of customer loyalty due to improved shop ratings and service quality. For the heterogeneous responses, I find that Taobao Village’s stimulating effects on rural entrepreneurial are more concentrated in areas with weaker government-market relation. Possible explanations include that potential entrepreneurs are more likely to start up business from offline to online to escape the government’s supervision (e.g., obtain government’s approval before the market entry). For the significance on the national economy’s inclusive growth, I find that areas with lower level of economic development will can benefit more from Taobao Village’s helping hand on rural economy.