How Green Finance Reform Narrows the Urban-Rural Income Gap: Evidence from China

Addressing the persistent urban-rural income gap is critical for sustainable and inclusive development. Leveraging panel data from 286 Chinese prefecture-level cities (2005–2022) and a multi-period difference-in-differences design, this study evaluates the impact of China’s Green Finance Reform and Innovation Pilot Zones (GFRIPZ) policy. First, the GFRIPZ policy significantly narrows the urban-rural income gap, with results robust to a range of sensitivity tests. Second, this convergence is driven by curbing conventional transport-infrastructure expansion and enhancing tertiary-sector employment, thereby improving labor quality. Third, policy effectiveness varies geographically and administratively, with the strongest impacts in central and western regions and non-provincial capitals. Fourth, negative spatial spillovers arise as pilot zones draw resources from neighboring non-pilot areas. These findings highlight the transformative potential of targeted green finance reforms for inclusive structural transformation in emerging economies.