Uneven Greening: Dynamics of Urban–Rural Income Gap During the Green Transition

ABSTRACT

In China, the urban‐rural income gap has narrowed in relative terms, yet it continues to widen in absolute terms. Beneath this macro‐level trend, the green transition may be reshaping the structure of urban‐rural incomes and the allocation of production factors. Utilizing data from Chinese prefecture‐level cities spanning 2016–2023, this study reveals a U‐shaped relationship between the green transition and the urban‐rural income gap. In the early stage, green transition reduces the income gap by enhancing the capitalization of green resources and increasing the share of labor income. However, the gap widens due to rising skill premiums, capital deepening, and asymmetries in sectoral productivity changes later. Additionally, this U‐shaped relationship exhibits significant heterogeneity across urban agglomerations and is amplified by strict environmental regulations and green knowledge capital. Moreover, the green transition generates spatial spillovers beyond local boundaries. This study provides both theoretical and empirical evidence on the distributive effects of green transition and offers a foundation for designing inclusive green policy frameworks.