How Does Digital Literacy Promote Inclusive Rural Growth? Micro-Level Evidence from Income Inequality Among Farm Households

Against the backdrop of the coordinated advancement of digital village construction and the common prosperity strategy, the widespread improvement in rural households’ digital literacy is emerging as a key force in reshaping rural income distribution and enabling sustainable rural development. Whether digital dividends can equitably benefit farm households with heterogeneous endowments has a direct bearing on the inclusive growth outcomes of digital village construction and the sustainable advancement of the common prosperity goal. Using three waves of panel data from the China Family Panel Studies (CFPS) covering 2018 to 2022, this paper empirically examines the impact of digital literacy on income inequality among rural households. The findings indicate that improvements in digital literacy significantly reduce rural household income inequality, and this conclusion remains robust across a series of robustness checks. Mechanism analysis reveals that digital literacy mainly curbs the widening of rural household income gaps through two core channels: expanding social capital and alleviating credit constraints. Heterogeneity analysis shows that the inequality-reducing effect of digital literacy is more pronounced among households that depend on non-agricultural income, have lower levels of human capital, or fall into relatively lower income brackets. Further analysis demonstrates that digital literacy significantly reduces inequalities in wage income, business income, and property income across rural households, whereas its mitigating effect on transfer income inequality is not statistically significant. Meanwhile, digital literacy significantly raises the probability of upward income mobility among rural households, thereby alleviating income inequality from a dynamic perspective. On the basis of these findings, this paper proposes policy implications in several areas: building a hierarchical and categorized rural digital literacy cultivation system, fostering a virtuous cycle of digital empowerment, equal opportunity, and income convergence, and optimizing income distribution structures and dynamic mobility mechanisms, with the aim of accelerating progress toward common prosperity.