The Impact of digital economy on the income gap between urban and rural area in China

Abstract

Since the birth of the concept of digital economy, many countries and regions have formulated strategies for the development of digital economy, and with the rapid progress of digital technology and the popularization of the Internet, digital economy has played an increasingly important role in China's economic structure. However, the impact of the development of digital economy on different regions and groups has significant differences, especially the income distribution between urban and rural areas has gradually attracted widespread attention. Attention to development efficiency should also pay attention to development equity. China's original geographic differences, coupled with the inconsistency of the pace of economic development in various regions, have resulted in structural differences, and the imbalance between urban and rural development is an important manifestation. And the balanced development of urban and rural areas is an important element of common prosperity, so how to change the status quo of China's urban and rural income imbalance is a difficult problem we need to solve at present. To alleviate the income gap between urban and rural areas, there are mainly ways to break down the barriers between urban and rural areas, so as to allow the free flow of production factors; to promote the reform of financial institutions, and to promote the balanced development of finance in urban and rural areas. As a new economic form, digital economy is characterized by innovation, revolution and scale, which can compress the time and space distance, enhance economic exchanges between regions and improve production efficiency. Exploring the impact of digital economy development on the urban-rural income gap and its mechanism of action can provide useful new ideas for China to solve the difficult problem of unbalanced urban-rural development. This study explores the impact of China's digital economy development on the urban-rural income gap. By constructing an econometric model, this paper analyzes the impact mechanism of the development of digital economy on the urban-rural income gap based on panel data from 2013 to 2022 for 31 provinces in China (except Hong Kong and Macao). The results of the study show that the digital economy has a significant U-shaped impact on the income gap between urban and rural residents, and this impact has regional heterogeneity; urbanization and education level play a moderating role in the U-shaped impact of the digital economy on the income gap between urban and rural residents; the time-trend term based on the time-trend term plays a significant role in the U-shaped impact of the digital economy on the income gap between urban and rural residents. The analysis based on the time trend term shows that the current level of China's digital economy development has not yet reached the inflection point of the “U” curve, and the digital economy is still able to narrow the income gap between urban and rural residents. To a certain extent, the expansion of digital economy helps to narrow the income gap between urban and rural areas, but its role is characterized by significant regional differences and stages. In economically developed regions, the effect of digital economy on narrowing the income gap is more obvious, while in economically relatively backward regions, the dividends of digital economy have not yet been fully released. Based on this, this paper proposes measures to further bring into play the positive role of the digital economy in narrowing the urban-rural income gap by improving the construction of digital infrastructure, enhancing digital literacy and skills training, and promoting the development of the rural digital economy.