New-Type Urbanization Policy and Regional Economic Inequality: Evidence from Satellite Data

Abstract Urbanization often exacerbates regional inequality while promoting economic growth. How to effectively coordinate spatial expansion and inclusive growth has become a policy challenge for developing economies. To address institutional constraints inherent in traditional urbanization pathways, China launched a new-type urbanization reform in 2014, aiming to achieve inclusive development within the region through urban residency conversion and equalization of public services. Exploiting the staggered rollout of this reform as a quasi-natural experiment and combining it with township-level nighttime-light data, we estimate a staggered difference-in-differences model that isolates the policy’s effect on intra-county inequality. The results show that the reform significantly narrows economic disparities within counties. Mechanism analyses indicate that the policy raises factor mobility and spatial connectivity by expanding off-farm employment, attracting non-agricultural firms, and upgrading transport and communication infrastructure, thereby compressing within-county inequality. Spatially, the reform widens the gap between pilot and non-pilot counties while fostering convergence inside treated counties, with the largest gains accruing to the most disadvantaged townships. Heterogeneity analyses show that the policy has a more significant effect in counties with lower initial inequality, lighter fiscal pressure, higher population density, and stronger public-service provision. These findings provide new evidence on how institutional urbanization reforms can advance inclusive regional development.