Abstract: Based on China’s city-level data from 2001 to 2016, this paper incorporates the population scale into the analytical framework of Internet and economic growth to re-estimate the influence of Internet on China’s economic growth. The findings show that, firstly, internet can improve the economic growth rate of Chinese cities on average, but the results are not robust, because the impact of Internet on cities with less population scale is not significant or is negative. Secondly, the larger the population scale of a city is, the greater the impact of Internet on economic growth will be. Thirdly, the network effect of Internet could explain this strengthening effect. The results of the threshold regression shows that there are two threshold values, 7.72% and 14.32% respectively, and only if the penetration rate exceeds 7.72%, can Internet improve the urban economic growth rate significantly. The result of the threshold regression shows that even in the Midwest of China with lower penetration rate, the promotion effect of Internet on the economic growth of big cities is still greater than that of small cities in the East area with higher average penetration rates. Therefore, the investment in the infrastructure of internet should be made on the city level or the level of city clusters, so as to take both efficiency and regional balanced development into account.

Key words: internet, penetration rate, population scale, economic growth of Chinese cities, network effects