The Information Technology and Relative Poverty: An Analysis Based on the Micro Data of China Family Panel Studies

Abstract

Drawing upon the Information Content Effect, this study utilizes data from the China Family Panel Studies (CFPS) to investigate the influence of information technology (IT) on the relative poverty (defined as falling below the median income) among both urban and rural Chinese families, as well as to elucidate the underlying mechanisms driving these effects. Our results show that using IT is conducive to alleviating the relative poverty of Chinese urban and rural families. After accounting for potential endogeneity using instrumental variables (IV), this effect was still significant. The effect of IT was more obvious in its performance in families with strong learning motivation, strong learning abilities, high-frequency Internet learning, and high-frequency Internet-based social interactions. The effect was also most pronounced in male-headed families and families in areas with more-developed transportation facilities. Further analysis indicates that IT affects relative poverty by promoting employment, access to credit, risk-taking, and entrepreneurship of urban and rural families. This implies that implementing IT can help families to make employment and credit decisions, increase their appetite for risk, and encourage them to start a business, thereby alleviating families’ relative poverty. This study offers novel empirical evidence to comprehend the mechanisms through which IT impacts relative poverty.

Keywords: Information technology, employment, credit, risk preferences, entrepreneurship, relative poverty