Can the Low-Carbon Transition Impact the Urban–Rural Income Gap? Empirical Evidence from the Low-Carbon City Pilot Policy

Environmental transformation is a broad and profound economic and social systemic change, which will certainly influence a number of the economic system fields. In particular, does China’s continued low-carbon transition widen the urban–rural income gap while achieving energy conservation and emission reduction targets? This research investigates the effects of low-carbon city pilot (LCCP) programs on urban-rural income gaps and associated mechanisms using a panel of 282 prefecture-level cities from 2007 to 2021. The analysis finds that: (1) LCCP policies exacerbate the urban-rural income disparity in general. In pilot cities, policy implementation widens the urban-rural income difference by roughly 0.5% on average when compared to non-pilot cities. (2) LCCP policies have a direct U-shaped association with employment structure and have a favorable influence on employment structure. (3) The LCCP policies have an inverted U-shaped association with regional innovation capacity, and the LCCP policies have a positive influence on regional innovation capacity. (4) The effects of LCCP policies on urban-rural income disparities vary dramatically between cities based on geography, city size, and resource endowment. The Chinese government should break down market segmentation and encourage urban-rural integration in order to foster technical advancement and scientific and technology innovation, therefore closing the urban-rural income gap and attaining high-quality economic growth in China.