Agricultural subsidy policy reform and rural digital economic transformation: Evidence from China

Rural digital economic transformation has become an important component in promoting agricultural modernization and rural revitalization. This paper focuses on the impact of agricultural subsidy policy reform on rural digital economic transformation in China. Using panel data from prefecture-level cities across China, the study applies the difference-in-differences (DID) model to explore the causal effects of agricultural subsidy policy reform on rural digital economic transformation. The results show that agricultural subsidy policy reform significantly promotes rural digital economic transformation, and this conclusion holds after a series of robustness checks. Mechanism analysis reveals that agricultural subsidy policy reform drives rural digital economic transformation through promoting agricultural mechanization, fostering new agricultural business entities, and reducing the urban-rural income gap. Furthermore, the study finds significant heterogeneity in the effects of agricultural subsidy policy reform. The results show that the positive effects of the policy are relatively stronger in coastal cities and non-transport hub cities, while no significant differences are observed between cities of different sizes or those classified as old industrial base cities. This study provides theoretical insights for policymakers and serves as a basis for using agricultural subsidy policies to promote the comprehensive digitalization of rural economies.