The impact of digital economy delopment and the mediating effect of industrial structure on the Urban-Rural income gap in Mainland China

The objectives of this study are to generate an improved digital economy development index (DEDI), to examine the impact of digital economy development on the urban-rural income gap (URIG) from both aggregate and disaggregate perspectives, and to test the mediating effect of industrial structure in this relationship. Data from 30 provincial-level regions in Mainland China are collected from 2013 to 2022. The study employs the entropy method for index construction, system-GMM for dynamic panel estimation, heterogeneity testing to identify regional differences, and the mediating effect test. The findings show, the improved index (DEDI) effectively measures digital economy development across China. The system-GMM results documented a positive and significant first-order coefficient for DEDI, with a negative and significant second-order coefficient. The results of Heterogeneity test indicate significant regional variation in the relationship between DEDI and URIG, and the findings of the third analysis provides indication that industrial structure upgrading significantly mediates the relationship between digital economy development and the income gap, while industrial structure optimization does not. Additionally, the impact of DEDI on URIG follows an inverted U-shape at the aggregate level, with significant regional heterogeneity at the disaggregate level. Based on the findings obtained, we may conclude there is a complex, regionally differentiated relationship between digital economy development and income distribution in China. However, in term of policy implications, it is highly recommended the policy makers to focused on the roles of different secondary indicators within DEDI, for the purpose of improving DEDI_s acceleration in reducing of the urban-rural income gap. Other than that, policymakers should also implement region-specific digital economy strategies, particularly in regions where its impact is most pronounced, prioritize industrial structure upgrading, and reconsider the role of industrial structure optimization in policies aimed at improving income equality.