Abstract: Based on the background of common prosperity, this paper constructs the framework of income distribution-consumption-upgrading-strategic-emerging industries, and investigates the impact of income distribution on the development of strategic emerging industries and the mechanism role of consumption upgrading within such impact from two dimensions of residents’ income level and income gap. The results show that: (1) Residents’ income level has a significant positive impact on total factor productivity of enterprises; there is a significant inverted U-shaped relationship between income gap and enterprise total factor productivity, and the average income gap in the sample period is higher than the corresponding threshold, which inhibits industrial development; this conclusion holds true in robustness test and endogenous test. (2) The mechanism test shows that both the growth of residents’ income and the reasonable income gap will accelerate the upgrading of consumption, thus enhancing the development of strategic emerging industries. (3) The heterogeneity of development stage indicates that in the early stage of economic development, residents’ income level should be improved; as the economy enters a new normal, we need to focus on narrowing the income gap. The heterogeneity of urban and rural areas indicates that improving the income level and narrowing the income gap will promote industrial development. Regional heterogeneity shows that improving regional income level, narrowing income gap in the underdeveloped regions, and maintaining reasonable income gap in the developed regions help industrial upgrading.

Key words: common prosperity, income level, income gap, consumption upgrading, strategic emerging industries