The impact of digital finance on the urban-rural income gap: an empirical analysis based on spatial econometric modeling

China’s economy has stepped into the new normal development stage. Coordinating urban and rural economic development and continuously narrowing the income gap has become a more urgent strategic task, and digital finance is an important engine for economic development and transformation and upgrading, is bound to have a far-reaching impact on the narrowing of the urban-rural income gap. This paper first explores the essential relationship between digital finance and regional economic development and lists the important roles played by digital finance in regional economic development. The entropy power Topsis method is used to select variable indicators and construct the index system. Combining the Moran index, spatial spillover effect, and spatial panel regression model, the regional economic distance is used as the spatial weight matrix, and the corresponding elemental expressions are derived to construct the spatial econometric model of the urban-rural income gap by digital finance, and the model parameters are estimated by the great likelihood method. The model is applied to 31 provinces in China to measure their relevant variables from 2012 to 2022 and analyze the impact of digital finance on the urban-rural income gap from the perspectives of spatial autocorrelation and threshold regression. Through the experiment, it can be seen that the digital finance indexes of the eastern, central, and western regions are all negative, and they are significant at the 5%, 10%, and 10% levels, respectively, which indicates that the digital finance in these three regions stimulates the development of the financial industry while narrowing the urban-rural income gap. When the level of economic development crosses the first threshold value of 10.4365, the regression coefficient of digital finance decreases from -0.0348 to -0.0487, which again confirms that digital finance can reduce the urban-rural income gap. © 2024 Yanjie Tian, published by Sciendo.