Digitalization’s Effects on IncomeGrowth and Distribution- Evidence from the CHDES Database

Huang Yanghua, Zhang Jiajia, Cai Yuhan, Zhang Jinshuo*

School of Applied Economics, Renmin University of China, Beijing, China

Abstract: Using the CHDES database, we created the CIDI to comprehensively quantifydigital adoption at the individual level and examine digitalization’s impact on individualincome. Empirical analysis results indicate that increasing the CIDI by one standarddeviation (0.13) improves individual income by 5.93 percentage points, which remainstrue after a series of endogeneity and robustness tests. In the heterogeneity analysis, wediscovered that when digital adoption grows, residents in the countryside and county seatscan earn more money through internet business operations and other channels. This helpsto decrease the urban-rural income divide, but it has also pushed those digitally skilledinto high-paying sectors, widening the income gaps between sectors. In the mechanismanalysis, we developed an income function that takes into account the individual level ofdigitalization to show that digitalization can boost income by increasing working hours orlabor participation and adjusting the portfolio of individual material, human, and socialcapital. In this paper, we have expanded the system for measuring the individual levels ofdigitalization by offering basic data, research methodology, and policy suggestions for thedigital economy’s inclusive development.

Keywords: Digital economy, level of digitalization, digital empowerment, income function

JEL Classification Codes: D13, R21, J24

DOI: 10.19602/j.chinaeconomist.2024.07.03