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Abstract Gradually narrowing the urban-rural income gap is imperative for achieving rural revitalization and common prosperity. Common prosperity necessitates the overall economic development, emphasizing both efficiency concerns such as economic growth and equity issues like income inequality. This study employs panel data spanning from 2008 to 2021, encompassing 280 Chinese cities at prefecture-level and above. Initially, it gauges the disparity in total factor productivity (TFP) between industry and agriculture, as well as between the service industry and agriculture, alongside the urban-rural income gap in China. This evaluation utilizes the nonparametric Malmquist index method and the Thiel index, respectively. Subsequently, the study empirically assesses TFP industry disparities and the urban-rural income gap through β-test and σ-test methodologies, respectively. Furthermore, it empirically investigates the direct influence of TFP industry disparities on the urban-rural income gap, and the marginal impact of TFP industry disparity convergence on the rate of urban-rural income gap convergence in each city, adopting the systematic generalized method of moments estimation (SYS-GMM model) from a convergence perspective. By integrating TFP industry disparities and the urban-rural income gap into a unified analytical framework, this paper addresses the limitations of previous research, which predominantly analyzed TFP convergence and its impact on the urban-rural income gap solely within individual industries or on an aggregate level.
The study’s findings indicate several significant observations: (1) Both nationally and regionally, from 2008 to 2021, the average disparity in total factor productivity (TFP) between the service sector and agriculture surpasses that between industry and agriculture. Concurrently, a consistent downward trend in both the ratio of per capita disposable income for urban and rural residents and the Thiel Index suggests a gradual reduction in China’s urban-rural income gap. (2) The urban-rural income gap and disparities in total factor productivity exhibit robust trends of β-convergence. Further σ-convergence tests employing coefficient of variation (CV) affirm an optimization-type convergence in both TFP disparities and the urban-rural income gap. (3) The pace of convergence in total factor productivity disparities notably slows post-2015. (4) Total factor productivity industry disparities, from a convergence perspective, exacerbate the urban-rural income gap and escalate urban-rural income inequality. This conclusion is corroborated in further robustness tests incorporating variable replacements, estimation method replacements, alterations in sample time intervals, and additional control variables. (5) The industrial disparity in total factor productivity significantly impedes the convergence of the urban-rural income gap, hindering its continuous narrowing.
Based on the aforementioned conclusions, the study yields several policy insights: At the industrial level, there’s a necessity to enhance the price formation mechanism for land transfer, facilitating the orderly transfer and aggregation of land to enable large-scale agricultural operations and boost agricultural productivity. Concurrently, leveraging industrial integration, comprehensive management of agricultural resources should be vigorously pursued, extending the agricultural industry chain to elevate agricultural value-added, thereby enhancing agricultural productivity. At the regional level, governmental focus should be directed towards supporting cities and regions with significant industrial disparities. This entails creating a policy and institutional framework conducive to sustainable long-term development, while also fostering more non-farm employment opportunities for agricultural laborers. Additionally, emphasis should be placed on strengthening agricultural industrial integration, advancing agricultural modernization, and augmenting agricultural productivity to achieve notable growth and effectively narrow the urban-rural income gap across cities and regions.
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Published: 30 July 2024
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