Transforming consumption: How E-commerce reshape online shopping behavior and household spending

The high savings, low consumption dilemma among Chinese rural households remains a persistent development challenge. Emerging digital e-commerce adoption may recalibrate this imbalance. This study presents the first systematic examination of how Rural E-commerce Demonstration Counties (REDC) program influences rural household consumption patterns, leveraging data from the China Household Finance Survey (CHFS) spanning 2013 to 2021 combined with geospatial Points of Interest (POI) data sourced from navigation platforms. Our staggered difference-in-differences estimates reveal that the REDC program increased rural households' online shopping participation rate by 1.9 percentage points on the extensive margin. At the intensive margin, the program expands consumption options without reducing offline consumption. The mechanism analysis indicates that government investment in logistics serves as the primary channel for the increase in online shopping, accompanied by a concomitant increase in local labor supply that could be associated with more opportunities in logistics. Furthermore, we verify the digital inclusive function of e-commerce through heterogeneity analysis and find that households with limited resources benefit more from the REDC program. Our findings advance understanding of how targeted e-commerce policies reshape households' consumption patterns, offering developing countries actionable insights for designing digital inclusion programs.