Green Innovation and the Urban-Rural Income Gap: Empirical Evidence from China

An in-depth understanding of the impact of green innovation on the urban-rural income gap is essential for developing countries seeking to address urban-rural imbalances and promote sustainable economic development. This study focuses on China, utilizing provincial panel data from 2007 to 2022, and employs the two-way fixed effects model, the mediating effects model, and the moderating effects model. The study's key findings are: (1) Green innovation positively reduces the urban-rural income gap. Specifically, the regression results indicate that a one-unit increase in green innovation corresponds to a 0.017-unit reduction in the urban-rural income gap. (2) The heterogeneity analysis reveals that the effect of green innovation on the urban-rural income gap is more pronounced in regions with higher levels of economic development, in non-food-producing areas, and when green utility patents are adopted. Additionally, green innovation narrows the urban-rural income gap predominantly in high-skill regions. (3) Examining the influencing mechanism confirms that green innovation reduces the urban-rural income gap by promoting population urbanization, eco-urbanization, labor force restructuring, and mitigating wage income inequality. (4) The moderating effects analysis indicates that environmental pollution exacerbates the impact of green innovation on the urban-rural income gap; specifically, higher levels of environmental pollution amplify the effect of green innovation in reducing the gap. These findings offer valuable insights for addressing urban-rural income inequality and fostering sustainable socio-economic development in developing countries.