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Urban–rural income inequality is a major challenge to social stability, inclusive growth, and sustainable modernization in developing and transition economies. Using panel data from 30 Chinese provinces from 2012 to 2020, this study examines how public service level (PWS) and marketization level (ML) affect urban–rural income inequality within a unified analytical framework. Urban–rural income inequality is measured by the Theil index, and entropy-weighted composite indices are constructed for PWS and ML. A panel fixed-effects model is employed to estimate the direct effects of PWS, ML, and their coupling coordination, while also testing the mediating roles of the growth rate of household income (GRHI) and the efficiency of human capital allocation (EHCA), as well as the threshold effect of the urbanization rate (Urb). The results show that both PWS and ML significantly reduce urban–rural income inequality and that stronger coupling coordination between them further narrows the income gap. PWS mainly works by promoting GRHI, whereas ML operates by improving EHCA. Moreover, the effects of both PWS and ML become stronger only when Urb exceeds a certain threshold. These findings provide insights for promoting inclusive and balanced development.
Wang et al. (Wed,) studied this question.