Low-Carbon Transformation and Common Prosperity: An Analysis of the “Inverted U-Shaped” Relationship

Low-carbon transformation and common prosperity are critical pillars of China’s economic growth. To explore the mechanism relating the two, this paper analyzes how carbon efficiency influences the urban–rural income gap, including its transmission mechanism and heterogeneity, and uses panel data from 240 Chinese prefectural cities (2006–2019). The results reveal an “inverted U-shaped” relationship between the low-carbon transition and urban–rural income gap. Specifically, as the carbon emission efficiency improves, the impact of the low-carbon transition on the urban–rural income gap changes from positive to negative. This finding remains robust under robustness tests. The heterogeneity test indicates that the “inverted U-shaped” relationship exhibits regional heterogeneity, resource endowment heterogeneity, economic development stage heterogeneity, and urban–rural income gap level heterogeneity. Furthermore, urban low-carbon transition influences the urban–rural income gap through industrial structure, employment structure, and human capital. This paper discusses the combination of low-carbon transformation and common prosperity, and takes into account both ecological sustainability and social sustainability. The findings of this paper offer policy proposals for advancing the achievement of dual-carbon goals and common prosperity, and provide references for developing countries.