The Impact of Urbanization Level on Urban–Rural Income Gap in China Based on Spatial Econometric Model

Abstract

With the rapid development of China’s economy, urbanization is gradually accelerating, but the income gap between urban and rural areas is growing, which may constrain economic development. To test the impact of urbanization on the urban–rural income gap, this paper uses panel data of 31 provinces (cities/autonomous regions) in China from 2007 to 2018, and combines ArcGIS technology to construct Spatial Dubin Model. This paper finds that the increase in urbanization level in China can significantly reduce the urban–rural income gap. The mediating effects model further shows that the increased level of urbanization in China promotes the flow of factors, which helps the flow of capital and advanced technology into the countryside and increases productivity. It also promotes the transfer of a large amount of surplus labor to the tertiary sector, adjusting the industrial structure and increasing the income of peasants moving to the city. In addition, the development of urbanization in China can lead to the construction of public education, improving the conditions and quality of education and teaching, and increasing the possibilities for farmers to earn high incomes. As a result, the urban–rural income gap in China has been narrowed. The findings of this paper are useful for understanding the underlying mechanisms in the level of urbanization and the urban–rural income gap in China. It provides policy insights for accelerating China’s new urbanization process and promoting the coordinated development of China’s urban and rural regions.