Abstract: Digital inclusive finance, as an extension of inclusive finance, fits the essential requirement of financial innovation for high-quality economic development, and is bound to be the most important driving force to promote high-quality development of China’s agricultural and rural economy and sustainable reduction of the urban-rural income gap in the future. This paper empirically analyzes the threshold effect of digital inclusive finance on the urban-rural income gap through the construction of a panel threshold model based on the data of Chinese provinces (municipalities directly under the central government and autonomous regions) from 2011 to 2020. The findings show that:1) digital inclusive finance development helps narrow the urban-rural income gap, but there is a double threshold for this effect, and the robustness test of replacing the explanatory variables confirms this conclusion; 2) if we divide China into three major zones, less developed, more developed and developed provinces, according to the threshold of GDP per capita, it is found that digital inclusive finance development significantly narrows the urban-rural income gap in the more developed and developed provinces, i.e. it provides an important “digital opportunity”; 3) farmers in less developed provinces are facing a significant “digital divide”. Under the catalysis of “new driving forces” such as data elements and digital technology, digital finance provides a “new path” for achieving common prosperity. To alleviate the imbalance between urban and rural development and inadequate rural development, and promote common prosperity of farmers and rural areas, it is necessary to further alleviate the gap between urban and rural digital infrastructure, crack the digital application gap between urban and rural residents, and ease the digital development gap between financial institutions.

Key words: digital inclusive finance, urban-rural income gap, digital divide, high-quality development