The Impact of Internet on Urbanization in China: Empirical Evidence from Chinese City-Level Data

Abstract

China is experiencing urbanization at an unprecedented rate over the last two decades. This study explores the effect of internet infrastructure on urbanization in China, based on a panel data of 39 main cities from 2001 to 2007. Two-stage least square model was employed to ascertain the impact of internet penetration rate on urban GDP per capita in the first stage. In the second stage, urban GDP per capita, as well as other urban indicators are used to explain the degree of urbanization, which is defined in this study as urban population proportion in the second stage. Consistent with a number of the key hypotheses, the findings suggest that internet penetration rate has a direct and significant and positive influence on urban GDP per capita, and an indirect effect on increasing urban population proportion through urban GDP per capita. Economic growth continues to fuel China?s urbanization.