How does townships’ economic landscape affect urban–rural income inequality in China?

The grassroots economy has an important influence on in promoting the formation of regional economic ties to reduce inequality in urban–rural development, especially in developing countries. Township, as grassroots organizations, serve as conduits connecting rural and urban areas, receiving the economic radiation effects of urban development and influencing rural economies. It plays a significant role in promoting coordinated development between urban and rural regions. However, the impact pathways and effects of township economy on the coordinated development of urban and rural economy have not been effectively evaluated yet. We use data from 24,758 township units in 2017 to examine towns’ economic characteristics, selecting 312 prefecture-level cities to measure economic patterns and quantify TEL from absolute and relative perspectives to analyze the impact on urban–rural income gap. The results show that the impact of TEL on the urban–rural income gap is significantly heterogeneous in space. The higher level of urbanization and industrial development in townships, the more conducive it is to narrowing the urban-rural income gap. The urbanization of townships in the eastern region has a greater impact on the urban-rural income gap, while industrial development of townships in the western region has a greater impact on the urban-rural income gap. The high level multicenter TEL can alleviate the urban–rural income gap in places with large urban space, while a high level single-center TEL can narrow the urban–rural income gap in places with small urban space.