Digital Economy, Factor Allocation and Urban–Rural Income Disparity: Insights from Prefecture-Level Data in China

The rapid expansion of digitalization is reshaping factor mobility and income distribution between urban and rural areas, with important implications for inclusive and sustainable development. Using panel data for 277 prefecture-level cities in China from 2012 to 2022, this study examines how DE affects urban–rural income disparity from the perspectives of nonlinear effects, factor allocation, and spatial interdependence. Compared with existing studies based mainly on provincial data, this paper provides a more fine-grained analysis at the prefecture level and combines mediation, double-threshold, and spatial analysis within a unified framework. The results show that DE has a significant U-shaped effect on urban–rural income disparity, suggesting that digital development may initially narrow the gap but widen it after a certain stage. Urban–rural factor allocation acts as an important transmission channel, and its role exhibits a double-threshold characteristic. The effect of DE also varies across urban agglomeration types and stages of urbanization, with stronger impacts in more developed and urbanized regions. In addition, the direct effect of DE follows a U-shaped pattern, whereas its spatial spillover effect shows an inverted U-shape. These findings indicate that digitalization is not automatically equalizing and that its distributional consequences depend on factor allocation conditions, regional development stages, and spatial linkages. The study provides evidence for policies aimed at reducing urban–rural inequality and promoting more balanced and sustainable development.