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<p>Income inequality is a&#xa0;global issue, and China’s unique dual social structure places rural residents at a&#xa0;lower social status than urban residents. In this context, examining the income disparity between urban and rural areas in China is particularly important. Using provincial panel data from 2003 to 2022 and a&#xa0;fixed effects model, the findings indicate that urbanization generally reduces urban-rural income inequality, but there is no strong evidence of a&#xa0;U-shaped relationship as suggested by the Kuznets hypothesis. Among the transmission mechanisms, the results show that urbanization promotes foreign trade, which serves as a&#xa0;key mechanism for reducing inequality, whereas labor mobility does not play a&#xa0;significant role due to the restrictions of household registration (hukou) system. The role of the social security system is limited and complex: although urbanization lowers overall social security levels, it inadvertently narrows disparities due to urban-centered resource allocation. The regional analysis reveals that urbanization has the most pronounced inequality-reducing effect in the western provinces, while its impact is statistically insignificant in the northeastern region, where economic stagnation and reliance on heavy industries limit its effectiveness. These findings underscore the necessity of hukou reform to enhance labor mobility and ensure equitable access to public services for rural migrants. They also underscore the need for regionally tailored policies, such as promoting urbanization in the west, enhancing trade openness, and improving rural social security.</p>

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The Impact of Rapid Urbanization on Urban-Rural Income Inequality: An Empirical Analysis Based on China’s Provincial Level

  • 期刊论文

  • 发表日期：

    2026年3月6日

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  • Haoran Zhou,
  • Norlin Khalid

摘要

Income inequality is a global issue, and China’s unique dual social structure places rural residents at a lower social status than urban residents. In this context, examining the income disparity between urban and rural areas in China is particularly important. Using provincial panel data from 2003 to 2022 and a fixed effects model, the findings indicate that urbanization generally reduces urban-rural income inequality, but there is no strong evidence of a U-shaped relationship as suggested by the Kuznets hypothesis. Among the transmission mechanisms, the results show that urbanization promotes foreign trade, which serves as a key mechanism for reducing inequality, whereas labor mobility does not play a significant role due to the restrictions of household registration (hukou) system. The role of the social security system is limited and complex: although urbanization lowers overall social security levels, it inadvertently narrows disparities due to urban-centered resource allocation. The regional analysis reveals that urbanization has the most pronounced inequality-reducing effect in the western provinces, while its impact is statistically insignificant in the northeastern region, where economic stagnation and reliance on heavy industries limit its effectiveness. These findings underscore the necessity of hukou reform to enhance labor mobility and ensure equitable access to public services for rural migrants. They also underscore the need for regionally tailored policies, such as promoting urbanization in the west, enhancing trade openness, and improving rural social security.