Is urbanization narrowing the urban-rural income gap? A cross-regional study of China

• This research applies bootstrap panel Granger causality to test the relationship between urbanization and the urban-rural income gap in China.
• The urbanization levels have a significant impact on the urban-rural income gap in one-third of all provinces.
• The urban-rural income gap does not play a significant role in urbanization in China.

This study applies bootstrap panel Granger causality to test the relationship between urbanization and the urban-rural income gap in China. We find that patterns of interaction between urbanization and the urban-rural income gap vary according to different regions. Empirical results show that urbanization does Granger-cause an urban-rural income gap, mainly in the Eastern region of China. In one-third of all provinces, the urbanization levels have a significant impact on the urban-rural income gap; however, the urban-rural income gap does not play a significant role in urbanization. The Eastern region's result is also in line with Kuznets's (1955) theory. These results could help regional governments develop fair policies for urban and rural income distribution in the process of urbanization of different regions.