Do the E-commerce-induced business clusters increase the income of local rural households?

In recent years, rural E-commerce clusters, represented by Taobao Villages, have emerged rapidly in China, becoming a significant force influencing regional economic development. To explore the impact of the formation of Taobao Villages on the household income of local residents, this paper employs a Difference-in-Differences (DID) approach and conducts an analysis based on data from the China Family Panel Studies (CFPS) from 2010 to 2020. The empirical findings show that: Firstly, on average, the formation of Taobao Villages negatively impacts local household income, resulting in a 5.3% decrease. Secondly, the formation of Taobao Villages boost local business income but reduce migrant workers’ wage income by drawing them back from higher-paying jobs. Collectively, the opportunity cost of forgone wages outweighs the increase in business income. Finally, heterogeneity analysis reveals that this impact is uneven across different groups, with the formation of Taobao Villages exacerbating income inequality among rural households in China. These findings suggest that policymakers should adopt a cautious approach to promoting E-commerce-induced business clusters, prioritizing equity safeguards to mitigate risks of declining labor income and unequal benefits among the population.