Broadband infrastructure development and illicit cigarette trade

The development of broadband infrastructure has had a profound impact on trade, but few studies have examined its impact on the illicit tobacco trade.

Based on panel data from nearly 300 cities in China from 2011 to 2016, the Difference-in-Differences (DID) method is applied to comprehensively analyze the impact of the Broadband China strategy on illicit cigarette trade. In order to solve possible sample selection biases, we use the Propensity Score Matching (PSM) approach before DID method in the robust test.

The implementation of the Broadband China strategy has led to a 16.32% reduction in the number of illicit cigarette trade cases (p < 0.01) and a 18.28% reduction in the value of illicit cigarette trade cases (p < 0.1). One critical mechanism is that the Broadband China strategy facilitates the popularization of urban surveillance cameras, which substantially improves the government's digital regulatory capacity to crack down on illegal trade. This deterrence effect has consequently reduced the volume of illicit cigarette trade. Heterogeneity analysis indicates that the inhibitory effect of the Broadband China strategy on illicit cigarette trade cases is more pronounced in coastal and border cities relative to inland cities.

Our findings highlight the potential of digital infrastructure as a tool for combating illicit trade, with important policy implications for leveraging technology in regulatory enforcement.