Digital divide, agricultural supply chain finance, and the urban-rural income gap in China

Abstract

The growing income disparity between urban and rural regions poses a major challenge to China’s economic development. Addressing the persistent urban-rural income gap (URIG) is essential for sustaining the country’s current economic momentum. This study investigates how agricultural supply chain finance (ASCF) shapes the distribution of income across urban and rural populations and examines the extent to which the digital divide, a prominent feature of the digital era, influences this interaction, thereby exacerbating income inequalities. This analysis is crucial for identifying barriers to rural revitalization and fostering equitable prosperity among Chinese farmers. Utilizing dynamic panel data collected from provincial-level observations between 2014 and 2020, the research finds that ASCF contributes to achieving a more balanced income distribution between urban and rural areas. However, the results indicate that the digital divide weakens ASCF’s effectiveness in narrowing the URIG. A mediating analysis highlights that ASCF mitigates income inequality through two primary pathways: advancing urbanization and enhancing non-agricultural employment opportunities, thereby promoting integrated development across regions. This paper offers valuable theoretical insights and actionable policy recommendations for advancing urbanization, achieving inclusive digital growth, bridging the digital divide, revitalizing rural economies, and fostering shared prosperity for farmers.