Rural Education, Financial Resilience, and the Urban–Rural Income Gap

Income inequality and rural—urban gaps remain pressing challenges in many emerging markets, where dual economic structures and uneven access to education and finance exacerbate disparities. This paper investigates the impact of rural education development on rural—urban income inequality and explores the mediating role of financial resilience. Using microdata from the China Household Finance Survey (CHFS), combined with provincial-level statistics, we construct a panel dataset and employ a two-way fixed effects model to conduct empirical analysis. The results show that higher rural education levels significantly reduce rural—urban income disparities, with the effect remaining robust under alternative specifications and endogeneity treatments. Further analysis indicates that education not only directly narrows the income gap but also indirectly contributes through enhancing households’ subjective financial capability (financial literacy) and objective financial capability (financial participation). Heterogeneity analysis reveals that the income equalizing effect of education is more pronounced in regions with lower levels of human capital, while its influence is broadly consistent across areas with different levels of financial development. Overall, the findings highlight the dual role of education in reducing income inequality by strengthening human capital accumulation and improving financial resilience. This study contributes to the literature on education, finance, and inequality in emerging markets, and provides empirical evidence supporting policies that integrate educational investment and financial inclusion to promote inclusive and sustainable growth.