Low-Carbon Transformation and Common Prosperity: An Analysis of the “Inverted U-Shaped” Relationship

The reform of RMB exchange rate formation mechanism has been advanced constantly and RMB exchange rate flexibility also has been enhanced orderly since July 2015, when China adopted a managed, floating exchange rate regime with reference to a basket of currencies instead of fixed exchange rate regime being pegged to the US dollar. In August 2015, China once again carried out the reform aiming at improving the central parity rate mechanism of RMB exchange rate against US dollar. Since then, the two-way volatility of RMB exchange rate has been normalized. As the price of home currency in the international market, the exchange rate can produce price and wealth effects along with its fluctuations, thereby resulting in distributional effect. On the one hand, owing to differentiated trade goods produced and consumed between rural and urban residents, the RMB exchange rate changes play a role in trade structure, industrial structure, employment structure and economic growth, and further in urban-rural income distribution pattern, by affecting import and export trade. On the other hand, the RMB exchange rate changes can affect types & amount of currencies that are possessed by urban-rural residents, and then have an important effect on cross-border capital investment. Especially with the internationalization of the RMB and the two-way opening-up of the financial market, the marketization of RMB exchange rate will be further heightened, thus it is no doubt that the effect of RMB exchange rate changes on income distribution will be strengthened.As an important aspect of unequal income distribution, urban-rural income gap has always been a major concern of all circles in China. Under the dual urban and rural economic background, this paper theoretically depicts micro mechanism concerning the effect of RMB exchange rate changes on urban-rural income gap. Then it applies panel threshold regression model proposed by Hansen(1999) with provincial data during the period of 1994 to 2016 and endogenous grouping to empirically investigate asymmetric and regional heterogeneous features of the effect of RMB exchange rate changes on urban-rural income gap in 28 Chinese provinces. Our results show that the effect of real effective RMB exchange rate changes on urban-rural income gap is not fixed, but depends on changes in regional per capita income and the degree of trade openness, thereby being featured by asymmetry and regional heterogeneity. Specifically speaking, the appreciation (depreciation) of real effective RMB exchange rate can reduce (expand) the urban-rural income gap in the provinces with low income level & low trade openness as well as middle income level & high trade openness, but will expand (reduce)the urban-rural income gap in the provinces with high income level and high trade openness. However, the changes in the real effective RMB exchange rate do not have an obvious effect on the urban-rural income gap in the provinces with middle and high income levels and low trade openness.Based on the conclusions of this paper, we can get the following enlightenment. Firstly, when formulating policies narrowing down the urban-rural income gap, Chinese governments should look upon the distribution effect of exchange rate changes and take different measures in different regions, to respond to the shock of exchange rate changes to urban-rural income gap. Secondly, to narrow down relative labor productivity gap between urban and rural areas is one of the important directions to alleviate income gap. Thirdly, in the process of expanding financial opening-up and trade openness, local governments should pay attention to the improvement of rural financial development and trade environment, and change the situation that rural areas cannot or will not enjoy the dividends of financial opening-up and trade openness to a greater extent, thereby providing conditions for narrowing down urban-rural income gap.The contributions of this paper are as follows:firstly, the existing literature investigates urban-rural income gap mainly from the perspectives of macroeconomic development, policy differences and historical legacy, while this paper focuses on exchange rate changes, which would enrich the previous research; secondly, we utilize the panel threshold approach and further explore the regional heterogeneous feature of the effect of RMB exchange rate changes on urban-rural income gap through endogenous grouping according to the threshold value, which is helpful to examine the income distribution effect resulting from real exchange rate changes more comprehensively & objectively; thirdly, the theoretical and empirical analysis of this paper helps us to understand the intrinsic mechanism and external manifestation of the effect of RMB exchange rate changes on urban-rural income gap, and then provides some enlightenment for governments to make relevant policies to reduce urban-rural income gap.

The Nineteenth National Congress of the Communist Party of China put forward the implementation of a rural revitalization strategy, which is an important way to achieve common prosperity for all the people, as promoting farmers’ income increase and narrowing the urban–rural income gap are key to promoting rural revitalization and common prosperity. So, under the background of vigorously promoting the rural revitalization strategy in China, it is very important to explore the effect and realization mechanism of geographical indication (GI) on reducing the urban–rural income gap. Based on the statistical data of 31 provinces in China from 2008 to 2019, this empirical study uses the spatial Durbin model (SDM) to analyze the relationship between GI and urban–rural income gap, and the stepwise regression method is used to explore the mediating effect of agricultural product exports on it. The results show that: (1) The potential economic value of GI branding can reduce the urban–rural income gap, and each additional unit of GI in this region will reduce the urban–rural income difference of this region by 0.160 units, and the urban–rural income difference of neighboring regions by 0.133 units. The result is still consistent after changing the proxy variable of urban–rural income gap for robustness test; (2) The brand effect of GI can form a stronger competitive advantage in foreign trade and promote the export level of agricultural products; (3) GI can narrow the urban–rural income gap through the export of agricultural products, and agricultural product export plays an important mediating effect. In the future, the government should not only strengthen the management and protection of GI but also actively market GI products. Promoting the international mutual recognition and mutual protection of GI can ensure the agricultural product export of GI and improve the foreign trade level of GI.

Can the backward endowments of rural areas support digital village construction to attain the expected results? If the answer is yes, what are the mechanisms involved? Answering these questions is related to common prosperity. Counties are China’s frontline commanders, and the urban–rural income gap is a suitable entry point for observing the urban–rural digital divide; however, there is limited research assessing the effectiveness of digital village construction from the perspective of the urban–rural income gap at the county level. In addition, counties lifted out of poverty, as counties with worse initial endowments and as counties that should be most concerned with common wealth, are more typical for examining the effectiveness of digital rural construction; however, there are few studies on counties lifted out of poverty. Based on cross-sectional data from 865 counties in China in 2020, this study empirically analyzes the impact of digital village construction on the urban–rural income gap using an OLS model. This study also conducts mechanism tests and poverty benefit tests in addition to heterogeneity and robustness tests. The findings indicate that the development of digital villages lowers the income difference between urban and rural areas, and that the shift in the industrial structure is a key driver of this effect. Different construction dimensions have varying degrees of impact, with digital infrastructure and the digitalization of the economy having the most significant impact, the digitalization of countryside governance coming second, and the digitalization of countryside life having the most negligible impact. The impact is more pronounced in the central-eastern region of China and counties that have just been lifted out of poverty than in the western region and counties that have never been in poverty. The government will benefit greatly from this study’s understanding of the main themes, areas, and scope of digital rural construction, which will help to expand and further integrate the outcomes of reducing poverty and fostering shared prosperity.

Effects of economic growth target on the urban–rural income gap in China: An empirical study based on the urban bias theory

PurposePolycentricity has become a crucial spatial development strategy. This paper aims to clarify the impact and mechanism of polycentric spatial structure on the urban–rural income gap, provide better countermeasures to narrow it and make development suggestions for cities of different scales.Design/methodology/approachBased on the panel data of Chinese cities from 2010 to 2019, this paper empirically examines the specific impact of polycentric spatial structure on the urban–rural income gap by utilizing a two-way fixed effects model.FindingsThe results show that the polycentric spatial structure is favorable for reducing the urban–rural income gap, and upgrading the industrial structure and improving transportation infrastructure are important mechanisms. Moreover, the role of polycentric spatial structure is more significant in large cities. However, in small and medium-sized cities, the role of polycentric spatial structure is not significant.Research limitations/implicationsThe limitations of this study include two main aspects. One is that this paper only analyzes the mediating effect of industrial structure and transport infrastructure, and we do not examine other mechanisms. The second is that due to data availability, this paper uses data from 2010 to 2019, and the research period can be further extended in future studies.Practical implicationsThis study has policy implications for building a polycentric city network and also provides insights into the planning of cities of different scales.Social implicationsThe polycentric spatial structure is important for narrowing the urban–rural income gap, especially in large cities. Improvement of transportation infrastructure and upgrading of industrial structure are important mechanisms. However, the polycentric spatial structure does not play a significant role in small and medium-sized cities. Thus, the polycentric spatial structure is not suitable for every kind of city. Relevant departments should carry out urban planning according to local conditions.Originality/valueAs a critical concern of urban planning, polycentricity significantly affects the urban–rural income gap. Relevant studies have analyzed the impact of polycentric spatial structure on regional income disparity, and few studies have focused on the relationship between polycentric spatial structure and the urban–rural income gap. Using city panel data in China, this paper explores the impact of polycentric spatial structure on the urban-rural income gap. Meanwhile, we test the mediating role of transportation infrastructure improvement and industrial structure upgrading. This study broadens the analysis of the urban–rural income gap’s influencing factors and provides a path reference for narrowing the urban–rural income gap.

Coordinating the relationship between the digital economy, green innovation, and the urban-rural income gap is conducive to promoting common prosperity in high-quality development. This study aims to show that, in the short term, the development of the digital economy will promote the level of green innovation, which, in turn, will promote the development of the digital economy, but will also widen the urban-rural income gap. The study uses panel data of 273 prefecture-level cities from 2011 to 2019, and adopts the panel vector error correction model for quantitative analysis, combined with the theoretical analysis of the long- and short-term causal relationship among the digital economy, green innovation, and urban-rural income gap. The results reveal that, in the long term, the digital economy, green innovation, and urban-rural income gap demonstrate a double-circular causality that is positively promoting each other. The robustness test validates the conclusions. Therefore, while promoting the development of the digital economy and green innovation, the government should control the urban-rural income gap within a reasonable range, to provide theoretical and practical support for promoting the sustainable development of China’s economy and realizing the goal of common prosperity.

Common prosperity is the essential aspiration of all the Chinese people, and China’s entry into a period of common prosperity coincides with the era of the digital economy. This paper analyzes the impact of the digital economy on the urban-rural income gap from two dimensions industrial digitization and digital industrialization. Based on China’s provincial panel data from 2013 to 2020, the spatial autocorrelation of various indicators in the digital economy is tested employing the global Moran index and local Moran scatter plot. This paper studies whether the digital economy directly affects the income gap between urban and rural areas by constructing a spatial Durbin model with a geographical inverse distance square matrix and whether there is a spatial spillover effect on the income gap between urban and rural areas, to explore how to solve the existing problems in the income gap between urban and rural areas in China through the perspective of digital economy development. The results show that the digital economy in China has a positive spatial autocorrelation to the urban-rural income gap; The impact of the development of the digital economy on the urban-rural income gap is not only reflected in the narrowing of the local region but also through the spatial spillover effect to narrow the income gap in the surrounding region. Digital industrialization has a significant role in narrowing the urban-rural income gap with both direct and indirect effects. Based on the empirical results obtained, this paper proposes that to adjust the imbalance in the development of the digital economy in different regions, digital industrialization and industrial digitalization should be further promoted, and the balanced development of the digital economy should be correctly guided through policy means, to play the regulating role of the digital economy in narrowing the urban-rural income gap.

Pathway to prosperity? The impact of low-carbon energy transition on China's common prosperity

A re-examination of the influence of human capital on urban-rural income gap in China: College enrollment expansion, digital economy and spatial spillover

In the context of solidly promoting common prosperity, narrowing the income gap between urban and rural areas is an important element in realizing common prosperity in China. In recent years, with the continuous development of the digital economy, the impact of the digital economy on the urban-rural income gap has become a hotspot of concern for all walks of life. Accelerating the construction of digital infrastructure to help narrow the urban-rural income gap is an important strategic direction for comprehensively promoting rural revitalization in the new era. The relationship between the development of digital technology and the urban-rural income gap shows an inverted "U" shape. In the short term, the development of digital technology may exacerbate the urban-rural income gap, but in the long term, its sustained development will help narrow the gap between urban and rural areas. In promoting the digitalization process in the future, the Government should pay more attention to expanding the breadth of its application, introducing relevant preferential policies for the central and western regions, and encouraging the sharing of infrastructure in developed regions, so as to more effectively contribute to the narrowing of the urban-rural income gap, and solidly promote the common prosperity of the entire population.

Using panel data for 29 provinces in China from 2000 to 2018, this paper mainly presents an empirical study on the impact of industrial structure upgrades on the urban–rural income gap. An overall analysis at the national level is conducted before the separate analysis of the relevant content of China's eastern, central, and western regions. The results reveal that at the national level, the upgrading of industrial structure is conducive to narrowing the urban–rural income gap; however, the impact of industrial structure upgrades on the urban–rural income gap differs from different regions: in eastern China, the impact of industrial structure upgrades on the urban–rural income gap varies over time, and the relationship between the two variables shows an N‐shaped curve; in central China, the upgrading of industrial structure can help to narrow the income gap between urban and rural areas; in western China, upgrading the industrial structure will widen the urban–rural income gap. Finally, certain policy recommendations are proposed.

BackgroundSince the reform and opening up, China’s urban and rural economic development has exhibited characteristics of imbalance, with the urban-rural income gap being the largest and most noticeable issue facing China’s socio-economic landscape. Alleviating and effectively resolving the urban-rural income disparity is crucial for achieving overall common prosperity. Therefore, this study provides insights for strategically narrowing the urban-rural income gap from the perspective of higher education investment.MethodsWe employ a panel fixed effects model to examine the basic regression, heterogeneity, mediating effects, and threshold effects. Simultaneously, we address the endogeneity issues in basic regression and mediating effects using the instrumental variable method. Additionally, we adopt the substitution of variables to ensure the robustness of the results.ResultsThis paper selects panel data from China’s eight major comprehensive economic zones from 2003 to 2021 for analysis. The findings reveal that, overall, higher education investment in China’s eight major comprehensive economic zones can narrow the urban-rural income gap. Specifically, higher education investment in 50% of these comprehensive economic zones—namely, the Northern Coastal Comprehensive Economic Zone, Eastern Coastal Comprehensive Economic Zone, Northeast Comprehensive Economic Zone, and Middle Yangtze River Comprehensive Economic Zone—can reduce the urban-rural income disparity. Conversely, higher education investment in the Middle Yellow River Comprehensive Economic Zone, Southern Coastal Comprehensive Economic Zone, Greater Southwest Comprehensive Economic Zone, and Greater Northwest Comprehensive Economic Zone has widened the urban-rural income gap. Additionally, higher education investment can affect the urban-rural income disparity through technological innovation. Overall, the impact of higher education investment on the urban-rural income gap in China’s eight major comprehensive economic zones is also influenced by the level of economic development, exhibiting an “inverted U-shaped” characteristic. This nonlinear impact varies across regions.ConclusionsIn conclusion, to narrow the urban-rural income gap across China’s eight major integrated economic zones, it is necessary to improve the mechanism for higher education investment in these zones. Strategies should be based on regional differences, tailored to local conditions, and implemented with a differentiated and precise approach to higher education development across regions. Emphasis should also be placed on the research and application of innovative technologies to achieve deep integration between urban and rural areas within China’s eight major integrated economic zones.

Digital village construction is not only a vital component of the digital China strategy but also a crucial measure by which to realize common prosperity. This study theoretically elaborates the influence of digital village construction on the urban–rural income gap (URIG) and its mechanism and empirically tests it by using a panel fixed-effect model, a mediating-effect model, and a moderating-effect model based on the provincial data of major producing areas from 2011 to 2020. The results show that digital village construction can significantly narrow the URIG, and rural industry revitalization is a vital channel for digital village construction in driving the decline of the URIG. The construction of transportation infrastructure can significantly enhance the inhibition effect of digital village construction on the URIG. Moreover, there is a human capital threshold for the impact of digital village construction on the URIG; after crossing the threshold, digital village construction better suppresses the URIG. So, the government should increase the financial support and technical support for digital village construction, improving the rural production conditions and industrial development environment and establishing a rural digital talent cultivation mechanism so as to achieve the goal of common prosperity.

PurposeTaking 30 provincial samples from 2001 to 2017 in mainland China as the research objects, this paper aims to evaluate the impact and effects of foreign direct investment (FDI) on the urban–rural income gap and reveals heterogeneity across regions.Design/methodology/approachFirstly, the Theil index is used to measure the income gap between 30 provinces in mainland China from 2001 to 2017, then the spatial econometric model is used to empirically test the impact of foreign direct investment on China’s urban–rural income gap and its heterogeneity across regions. Finally, a robustness test is performed.FindingsThe results show that there is a significant inverted U-shaped relationship between FDI and the urban–rural income gap in China. That is, FDI expands the urban–rural income gap in the short term and helps to converge it in the long term. In the eastern region, FDI has a convergence effect on the urban–rural income gap in the short term, which increases the long term. However, in the central and western regions, the relationship between FDI and urban–rural income gap has a weak inverted U shape.Originality/valueBy assessing the impact of FDI on the urban–rural income gap, this work provides decision-making support for China and other developing countries to improve investment policies and income distribution policies.

Social fairness and economic recovery stimulation constitute crucial challenges in countries all around the world, and tourism development has enormous potential for balancing efficiency and fairness. Based on the panel data at city level in Yangtze River Delta Region, China, this study uncovered the role that tourism development plays in economic growth and urban–rural income gap by adopting the dynamic SYS‐GMM model. In addition, the moderating effect model was employed to concentrate on the moderating role of urbanization on the relationship between tourism development and economic growth as well as urban–rural income gap. The main conclusions are as follows. First, tourism development does not only promote economic growth, but it also narrows the urban–rural income gap. Second, when it comes to the dynamic effect generated by tourism development, the economic growth‐promotion effect is stronger than the urban–rural income gap‐inhibiting effect. Third, urbanization can enhance the impact of tourism development on economic growth and the reduction of urban–rural income gap.