Digital economy and the urban–rural income gap: Impact, mechanisms, and spatial heterogeneity

Abstract

This study examines how digital economy development in China impacts the urban–rural income gap. We construct a digital economy development index using panel data from 30 provinces and cities in China from 2013 to 2021. By combining a spatially varying coefficient model with a chain–mediated effect model, we quantify the impact of digital economy on the urban–rural income gap and examine its spatial heterogeneity. The results show that the digital economy influences the urban–rural income gap through four different pathways, each of which exhibits significant spatial variation. As these paths offset each other, the digital economy development in Beijing, Inner Mongolia, Shanxi, Henan, Hubei, Jiangxi, Jiangsu, Guangdong, and other provinces has widened the urban–rural income gap, resulting in a digital divide effect. However, in most areas of China's northeast, east coast, and western regions, the digital economy development has narrowed the income gap, resulting in a digital dividend effect. This study investigates the relevant debates among scholars and provides valuable insights and foundations for strategic decision making to reduce the urban–rural income gap in various regions.