The impact of industrial digitalization on the urban-rural income gap

Abstract

Along with the rapid development of the global digital economy, China is experiencing profound transformations in industrial digitization. These transformations may significantly affect the urban-rural income gap. Using panel data from 30 Chinese provinces from 2012 to 2022, this paper empirically examined the impact of industrial digitalization on the urban-rural income gap based on a fixed-effects model. The findings reveal that the development of industrial digitalization in China widens the urban-rural income gap. Mechanism analysis indicates that industrial digitalization increases software business revenue and employment in the information services sector, thereby expanding the urban-rural income gap; additionally, industrial digitalization widens the income gap between urban migrants and rural migrant populations, further increasing the overall urban-rural income disparity. Heterogeneity analysis demonstrates that in the eastern region, industrial digitalization significantly enlarges the urban-rural income gap, whereas its effects are not significant in the central and western regions. The conclusions of this study provide empirical support and policy insights for China in advancing industrial digitalization and promoting common prosperity.