The formation of Taobao villages in China

We conduct the first econometric analysis of the determinants of the formation of Taobao villages, the rural e-commerce clusters recently appeared in China. We examine the roles of various factors such as location, education, transportation infrastructure, the structure of local economy, urban-rural income difference, local government policies and spillover from nearby Taobao villages in the formation of Taobao villages. We find that education plays an important and positive role in the formation of Taobao villages, while credit support for other businesses makes the formation of new Taobao villages less likely.