The impact of the factor mobility on urban-rural income inequality: evidence from China

During China’s process of industrialization and urbanization, the urban-rural dualistic segmentation results in lagging cultivation of rural factor market and asymmetric evolution of urban-rural factor markets. The empirical study demonstrates that the urban-rural factor mobility contributes to income growth while narrowing the income gap. And this income effect of factor mobility exhibits an accelerating pattern. Heterogeneity examination further reveals that the income-enhancing effect is more pronounced in eastern China relative to other regions. However, in regions with a higher industrial structure upgrading index, its gap-reducing effect is relatively weaker. Additionally, the urban-rural dualistic economic structure functions as a mediator in the income effect of factor mobility. Land transfer rate exhibits a threshold effect. Specifically, as the transfer rate increases, the income-boosting effect of factor mobility exhibits a marginally increasing trend. Therefore, this paper proposes a framework of “institutional empowerment ─ rights reinforcement ─ market-driven value creation”. Centered on rural land property rights reform as the catalyst, this approach takes the attraction of urban and rural talent as the endogenous driver, while leveraging social capital and government agricultural subsidies as exogenous drivers. This streamlined policy pathway theoretically underlines the central mechanism of rural land system reform in guiding other factors into rural areas, and in practice highlights the irreplaceability of market mechanisms in allocating various rural factors. Its goals are to realize the agricultural value appreciation and facilitate coordinated urban-rural development.