How does the digital economy affect the urban–rural income gap? Evidence from Chinese cities

Abstract

Seizing the opportunities presented by the integration of the digital economy with various economic and social fields will help improve national income levels and optimize income quality. However, the impact of the digital economy on the urban–rural income gap may exhibit a nonlinear relationship. This study constructs a digital economy indicator system from two dimensions: digital industrialization and industrial digitalization. It uses fixed effects, mediation effects, multi-period DID, and other methods to empirically analyze the impact of the digital economy on the urban–rural income gap. First, the study found that the impact of the digital economy on the urban–rural income gap follows a U-shaped relationship, contrary to the Kuznets hypothesis. The robustness of the benchmark regression analysis was validated through the removal of outliers, the use of alternative variables, and the application of 2SLS and GMM methods, with consistent findings. Second, during the study period, the advancement of the digital economy had yet to surpass the turning point of the U-shaped curve, thus contributing to the reduction of the urban-rural income disparity. Nevertheless, we observed heterogeneous characteristics. Third, the digital economy and the digital divide are characterized by ongoing dynamic transformations, and their combined effects exert a complex nonlinear influence on the urban-rural income disparity. This study provides new decision-making insights for accelerating the construction and improvement of digital economy development cooperation mechanisms and fully harnessing the powerful momentum of digital economy development.