E-Commerce Integration and Household Welfare: Evidence from Taobao's 100 Thousand Villages Project in China
by Ben Faber, Victor Couture, Lizhi Li and Yizhen Gu
Over the past 15 years close to one half of China's population have been connected to and by the internet. Over this period, the number of Chinese buying and/or selling products online has grown from practically zero in 2000 to more than 350 million in 2014, surpassing the US as the largest e-commerce market in the world. Despite this astounding trajectory, we currently have limited empirical evidence on the impact of e-commerce as a channel of market integration. This paper brings to bear a unique collection of microdata in combination with a randomized controlled trial (RCT) that we conduct in collaboration with the Chinese internet firm Alibaba to estimate the household gains from e-commerce integration. Alibaba owns the dominant Chinese online shopping platform TaoBao through which households can buy and sell products of all kinds. Alibaba's 100 Thousand Villages Project aims to build the necessary logistics to ship products to and sell products from 100,000 rural villages that were previously unconnected to e-commerce. As part of this operation, Alibaba installs a TaoBao terminal at a central village store where households can buy and sell products through the store manager's TaoBao account. The empirical design allows us to estimate a general expression of the change in household welfare due to the arrival of e-commerce, and to decompose that effect into several distinct channels. We also plan to explore the distribution of these effects across the pre-existing distribution of household incomes as well as across village characteristics, and quantify the channels that underlie this heterogeneity.