Bridging the Map, Widening the Gap: Digital Infrastructure and Income Inequality

Income inequality remains a central impediment to inclusive growth, yet whether government-led digital infrastructure programs mitigate or exacerbate distributional disparities is empirically contested. Exploiting the staggered rollout of China’s “Broadband China” (BBC) demonstration cities as a quasi-natural experiment, this study employs a multi-period difference-in-differences (DID) framework on a panel of 281 prefecture-level cities spanning 2009–2022 to estimate the designation effects of national digital infrastructure policy under the DID identifying assumptions. After parallel-trends validation, permutation-based placebo tests, and propensity score matching, the baseline estimates indicate a dual distributional pattern: BBC designation is associated with a wider urban-rural income gap and lower within-prefecture nighttime-light-based spatial income inequality. Candidate-channel analysis provides evidence consistent with financial deepening and factor mobility as plausible pathways: expanded financial coverage and cross-regional labor reallocation are associated with spatial convergence, whereas asymmetric usage depth and selective labor mobility reinforce urban-rural divergence. Exploratory heterogeneity analysis across four institutional dimensions, officials’ political promotion incentives, local fiscal capacity, traditional infrastructure endowments, and urban hierarchy, further shows that this distributional pattern varies across local contexts. Furthermore, this study extends the analytical lens to the spatial dimension by employing a spatial DID framework. The results identify significant cross-border externalities characterized by cross-prefecture spillovers associated with lower within-prefecture nighttime-light-based spatial income inequality in neighboring cities. These findings provide an integrated policy-evaluation framework that disentangles the complex, multidimensional distributional consequences of digital infrastructure investment, offering actionable insights for designing more equitable digital public policies in developing economies.