Can innovative city pilot policy reduce income inequality?

Ensuring fairness in income distribution is a fundamental requirement in achieving common prosperity. This study employed panel data sourced from 276 cities throughout China, covering the time frame from 2003 to 2022. It sets up a multi-stage difference-in-differences (DID) model to explore the impacts of the innovative city pilot policy on income inequality. Results indicate that this policy significantly reduces income inequality, a conclusion that remains robust across various tests. Meanwhile, the effects are more pronounced in central and western regions, non-border cities, Yangtze River Economic Belt cities, non-old industrial bases, ethnic-minority areas, low administrative cities, low initial income inequality and non-resource-based cities. The mechanism analysis indicates that these policies mitigate income inequality largely by fostering labour resource agglomeration, structure optimisation and innovative vitality. Through an analysis of the impacts of innovative city pilot initiatives, this study enriches our comprehension and provides significant perspectives for promoting income equality in the new epoch. In addition, it provides strategic guidance for expanding and scaling these pilot policies to broader contexts.