Abstract
Internet use is accelerating in rural communities of developing countries. Although much attention has been devoted to the effects of Internet use on subjective well-being, income growth, poverty reduction, digital financial inclusion, and social connections in these communities, little is known about how it affects their indebtedness. This paper bridges this gap by investigating the association between Internet use and household debt in rural China. We use a conditional mixed process model and the instrumental-variable-based causal mediation framework to analyse the 2017 China Household Finance Survey data. The results show that Internet use and household debt are positively associated: household debt is 5,370 yuan higher among Internet users than non-users. Using the Internet increases household debt through its effects on consumption and investment spending. Targeted initiatives to help rural residents gainfully utilize the Internet to improve their financial well-being should be implemented. Strengthening legislation to allow rural residents to securely and responsibly increase their investment and consumption using the Internet will enhance rural communities' welfare as Internet access becomes widespread over the coming years.
