Broadband infrastructure expansion and labour income share: micro-evidence from Chinese industrial enterprises

This study investigates the impact of broadband infrastructure on the labour share. We exploit the implementation of the ‘Broadband China Strategy’ (BCS) as an exogenous policy shock and use the staggered difference-in-differences framework with a panel dataset of Chinese industrial enterprises spanning 2011–2015. We find that the BCS leads to a significant reduction in the labour income share of firms in pilot cities compared with those in non-pilot cities, which remains robust after conducting various robustness checks. Rising market power and deepening capital are the two mechanisms underlying this effect. While our further analysis underscores significantly positive impact of broadband infrastructure on firm productivity and skilled labour structure, they do not highlight an elevated skill premium tied to broadband infrastructure. Heterogeneity analysis reveals that the effects are more pronounced among larger firms, industries with higher concentrations, and cities with higher innovation capacities. Overall, this study augments the existing literature on the firm-level determinants of labour share, providing a micro-level assessment of the labour market implications of broadband infrastructure.