City size, technological innovation, and urban income inequality: Empirical evidence from China family panel studies

Abstract

Cities in China are expanding and evolving innovatively at an accelerated rate. In this context, the question of whether all communities and individuals may benefit equally from urbanization and innovation merits investigation. We develop a two-way fixed-effect model employing data from the China Family Panel Studies for 2010, 2012, 2014, 2016, and 2018 to investigate the roles of city size and technological innovation in urban income inequality. In addition, we adopt a model with a mediating effect to study the impact of city size on urban income inequality by technological innovation. The empirical results are as follows: 1) urban income inequality tends to increase with city size, technological innovation, and the effect of city size on urban income inequality by technological innovation. 2) According to a regional heterogeneity test, city size has a significant impact on income inequality in western provinces and in first- and second-tier cities. Likewise, the size of non-resource-based cities has a significant impact on income inequality. Considering the potential endogeneity of city size, we devise an instrumental variable using historical population. The outcomes of a robustness test validate these findings. From the vantage point of city size and technological advancement, this research provides policymakers with a reference for lowering income inequality in urban areas.