Effects of digital literacy on rural labor allocation and income inequality

Introduction Rural prosperity depends in part on whether rural households can access more productive employment and income opportunities. The transfer of rural labor to non-agricultural sectors represents an important pathway for improving rural household income. In the digital era, digital literacy has become an increasingly important dimension of human capital that may shape rural labor allocation and the distribution of economic gains. Methods Using data from the China Family Panel Studies (CFPS), this study examines the relationship between digital literacy and rural household labor allocation and further investigates its associations with household income and income inequality. Results The results show that higher digital literacy is associated with greater labor allocation to non-agricultural activities and less labor allocated to agricultural self-employment. Broader access to information and general human-capital accumulation emerge as two important empirical transmission channels. Heterogeneity analysis further indicates that these labor-allocation patterns vary across households with different baseline human-capital levels and across household-head age and gender groups. Digital literacy is also associated with higher rural household income but greater income inequality, with the distributional association particularly evident in wage income. Labor reallocation represents an additional empirical pathway linking digital literacy to household income outcomes. Discussion These findings highlight the dual role of digital literacy in rural prosperity: it may expand employment and income opportunities, but the resulting gains are not necessarily shared equally across rural households.