The Impact of Digital Economy Development on the Urban-Rural Income Gap: Evidence From China

Abstract

As a new engine driving high-quality economic development in China, the digital economy has profoundly reshaped the patterns of factor allocation and income distribution. Investigating its impact on the urban-rural income gap and the underlying mechanisms is of considerable theoretical and practical significance for dismantling the urban–rural dual structure and advancing common prosperity. Drawing on panel data from 30 Chinese provinces over the period 2013–2024, this study examines the effect of digital economy development on the urban-rural income gap and the mechanisms through which it operates. The findings are as follows. First, digital economy development significantly narrows the urban-rural income gap; however, once the squared term is included, the relationship exhibits a U-shaped pattern—initially suppressing and subsequently widening the gap. Second, employment structure optimisation plays a key mediating role in the process through which the digital economy affects the urban-rural income gap, with the mediation effect accounting for approximately 27.8%. Third, the convergence effect of digital economy development on the urban-rural income gap is more pronounced in the central and western regions, as well as in areas with lower levels of digital economy development. Fourth, spatial spillover analysis reveals that digital economy development not only suppresses the urban-rural income gap within a given region, but also contributes to narrowing the gap in neighbouring regions. These findings suggest strengthening digital empowerment of rural economies and addressing employment structural contradictions to effectively narrow the urban-rural income gap.