Can Rural Land Reform Bridge the Urban-Rural Divide? Evidence from a County-Level Quasi-Natural Experiment of China’s Residential Land Policy

Narrowing the urban–rural divide is a critical challenge for developing countries and a core concern of the United Nations 2030 Agenda for Sustainable Development (particularly Sustainable Development Goals (SDGs) 10 and 11). To this end, China has launched pilot reforms of the rural homestead system to optimize the allocation of land resources, revitalize idle rural construction land, and advance the sustainable development of urban–rural integration (URI). Treating the rural homestead system reform pilots as a quasi-natural experiment, this study employs the difference-in-differences (DID) method based on panel data of 1380 counties (districts and county-level cities) in China from 2010 to 2021 to identify the reform’s impacts on county-level URI (an inverse measure of the urban–rural divide) and its transmission channels. The results show that the rural homestead system reform increases the URI index of pilot counties by an average of 0.102 units relative to non-pilot counties (cluster-robust standard error = 0.046, significant at the 5% level). This finding remains robust after a battery of tests including placebo tests, winsorization, lagged treatment and the exclusion of potentially affected controls. The policy effect exhibits obvious heterogeneity and is more pronounced in regions with higher baseline URI, municipal districts, county-level cities, as well as eastern and northeastern China. Mechanism tests further indicate that the reform functions through three channels: optimizing the allocation of urban and rural labor, accelerating the flow of capital factors, and promoting industrial structure upgrading. Specifically, labor, capital and industrial structure indicators at the county level rise significantly by approximately 1.5%, 3.2%, and 0.8%, respectively (coefficients equal to 0.0150, 0.0314, and 0.0076, all significant at the 1% level). The URI evaluation index constructed in this paper covers five dimensions: population, space, economy, society and ecology. Incorporating the ecological dimension enables the measurement of URI to reflect the multiple goals of sustainable development. The findings provide policy implications for deepening rural land system reform and advancing high-quality URI.