Digital Economy and the Urban-rural Income Gap -- An Empirical Study Based on the Provincial Panel Data in China

In the last several years, the digital landscape has undergone rapid and pervasive evolution, infiltrating every aspect of society comprehensively. Drawing upon provincial panel data spanning 2013 to 2022, this study meticulously crafts a multidimensional digital economy development index, encompassing three crucial facets. It explores the complex relationship between the expansion of the digital economy and the income gap between urban and rural areas using a two-way fixed effects model. Significant findings emphasize: First, China's wealth gap between urban and rural areas follows a pronounced U-shaped evolutionary trajectory; second, we are presently living in the early stages of this "U"-shaped dynamic, and there is a noticeable negative association between the gap's expanding and improvements in the digital economy, suggesting that digital economy proliferation serves as a moderating force, curbing the expansion of the income divide. Thirdly, mechanistic research demonstrates the significance of transportation infrastructure and industry restructuring in lowering the income gap between urban and rural locations. Moreover, a comprehensive examination reveals that the level of urbanization and the development of rural digital inclusive finance are potent moderators that significantly impact the convergence of the digital economy's progress towards narrowing the income disparity between urban and rural regions. Lastly, the heterogeneity study shows that the digital economy has a different influence on different regions; the central region is most affected, and the western and eastern regions follow suit.