Nonlinear Effect of Digital Economy on Urban–Rural Consumption Gap: Evidence from a Dynamic Panel Threshold Analysis

Reducing the disparity in consumption between urban and rural areas, as a critical component mitigating economic imbalance them, holds significant importance enhancing people’s sense of well-being achieving collective prosperity. This research investigated nonlinear impact digital economy its sub-dimensions, including industrialization, industrial digitization, environment, on urban–rural disparity. We employed systematic GMM dynamic panel threshold regression model utilized data from 30 provinces China. Our reveals that development gap displays an inverted U-shaped relationship widening then narrowing. effect is primarily determined by process industrialization. The exerts notable gap, with effects identified for income education financial expenditure livelihoods; these exhibit variation across three sub-dimensions economy. Further analysis plays vital role reducing hedonic developmental consumption, while promoting optimization upgrading structure. Upon accounting regional disparities urbanization rates, it has been observed economy’s dampening notably more pronounced areas lower rates urbanization. To effectively leverage positive bridging divide, recommended government accelerate establishment environment encourage integration industries traditional industries, optimize investment structure livelihood-based finance. These measures would help to create conducive thrive could contribute narrowing areas.