Rural e-commerce is seen as a crucial driver of regional development in rural areas, particularly in China. It overcomes geographical limitations, reduces transaction costs, and directly connects rural producers with consumers. To boost this development, the Chinese government launched the National Rural E-commerce Comprehensive Demonstration Project (NRECDP) in 2014. This project provides financial aid to chosen counties based on their existing e-commerce infrastructure, local government support, and agricultural resource endowments. While prior studies have examined the relationship between rural e-commerce and rural income, they largely ignore the self-selection bias inherent in NRECDP participation. This study addresses this gap by employing the endogeneity switching regression (ESR) model to analyze the impact of NRECDP on rural income in NLKPS counties. It also investigates factors influencing county selection for the project and explores potential heterogeneous effects across various regions and industry structures. The study contributes to the literature by considering the role of digital inclusive finance and exploring the mechanism through which NRECDP influences rural income growth.

Existing literature extensively covers the benefits of rural e-commerce, including increased rural income, reduced income inequality, poverty alleviation, and narrowing the rural-urban income gap. Studies have explored the impact of e-commerce on various aspects of rural development but often overlook the self-selection bias in government-led initiatives like the NRECDP. The role of digital inclusive finance, encompassing digital payments, investments, and financing, has also been largely understudied in the context of rural e-commerce development and its impact on income. Digital inclusive finance offers several benefits including providing capital for rural businesses, alleviating financial constraints, and stimulating rural consumption and investment. The current study aims to fill these gaps by rigorously examining the impact of the NRECDP while considering self-selection bias and the role of digital inclusive finance.

This study utilizes panel data from 592 national-level key poverty-stricken (NLKPS) counties in China from 2014 to 2020. The core dependent variable is the per capita net income of rural residents, and the key independent variable is participation in the NRECDP (1 if participating, 0 otherwise). To address the self-selection bias inherent in NRECDP participation, the researchers use the endogeneity switching regression (ESR) model. This model accounts for unobserved factors influencing both participation and income outcomes. The selection equation in the ESR model examines factors influencing NRECDP participation, while the outcome equation models rural income, considering whether a county participated in the NRECDP or not. The ESR model incorporates instrumental variables to address endogeneity. The study uses the average county slope multiplied by the year as an instrumental variable, justified by its influence on rural infrastructure development without directly affecting short-term income growth. Various control variables were included, representing factors such as education levels, population density, economic growth, infrastructure, industry structure, financial self-sufficiency, and the level of e-commerce development (measured by the number of Taobao villages). Digital inclusive finance is measured using the Digital Inclusive Finance Index developed by Peking University. The study also conducts heterogeneity analysis based on ethnic regions, geographic location (eastern, central, western regions), industry structure, and the "three regions and three prefectures" to examine the varying effects of the NRECDP across different contexts. A mechanism analysis is also conducted to explore the role of entrepreneurship in mediating the relationship between NRECDP participation and rural income growth.

The ESR model reveals that participation in the NRECDP significantly increases rural income in NLKPS counties by approximately 12.97%. Key determinants of NRECDP participation include digital inclusive finance, e-commerce development, industry structure, and infrastructure development. Factors influencing rural income include education levels and population density. Heterogeneity analysis shows stronger positive effects of NRECDP participation on rural income in non-ethnic regions compared to ethnic regions. The central region experienced a more pronounced positive effect than the western region, and areas with a higher level of industry structure benefited more from the program. Notably, the "three regions and three prefectures," characterized by severe poverty, saw the highest income growth effects from NRECDP participation. The mechanism analysis indicates that entrepreneurship plays a significant mediating role, with NRECDP participation leading to increased entrepreneurial activity and subsequently higher rural income.

The study's findings highlight the effectiveness of the NRECDP in boosting rural income in China, especially in strategically selected counties. The significant impact of digital inclusive finance underscores the crucial role of financial inclusion in facilitating e-commerce adoption and growth. The heterogeneity analysis reveals that the NRECDP's impact varies across regions and contexts, emphasizing the importance of tailored strategies and targeted interventions. The identified mediating role of entrepreneurship suggests that policies supporting entrepreneurship are essential for maximizing the impact of e-commerce initiatives on rural development. These findings are relevant for policymakers and researchers interested in rural development, poverty reduction, and the role of e-commerce in fostering economic growth.

This study demonstrates the significant positive impact of China's NRECDP on rural income, especially in NLKPS counties. The findings highlight the importance of digital inclusive finance, infrastructure development, and industry structure in successful e-commerce development. Heterogeneity analysis emphasizes the need for context-specific policies. Future research could explore the long-term impacts of the NRECDP, investigate the specific mechanisms by which entrepreneurship influences income, and analyze the sustainability of the income gains achieved through the project.

The study's limitations include the use of fixed-line telephone subscriptions as a proxy for infrastructure development, potentially underrepresenting the role of internet access and road infrastructure. The study also uses the initial 2014 list of NLKPS counties, acknowledging that subsequent changes to this list could affect the results. Further research could address these limitations by using more comprehensive measures of infrastructure and accounting for changes in the NLKPS county list over time.