Digital economy and industrial structure transformation and income distribution

Abstract

ABSTRACT Income distribution has become a serious challenge to China’s sustainable development. Previous studies have identified educational inequality and globalization as the most important reasons for increasing the imbalance in income distribution, but rarely have they examined the mechanism of the digital economy on income distribution from the perspective of industrial structural transformation. The theoretical study adopts a dynamic general equilibrium model containing about the production sector and the household sector, and by comparing the static equilibrium analysis, we get that the digital economy affects the flow of labour and capital and then industrial structure transformation, which ultimately affects the income distribution; in terms of the empirical evidence, we use the data of 37 cities in the Yangtze River Economic Belt in the period of 2011–2021, and we use the mediation effect model to determine the factors and mechanisms affecting the income distribution. The results of the study show that the level of digital economy development optimizes income distribution through rationalization of industrial structure and advanced industrial structure, and has a U-shaped characteristic of inhibiting income distribution first and then promoting it. The study expands the literature on income distribution and proposes future research directions.