Abstract: Digital inclusive finance (DIF) can reduce the cost of financial services and alleviate financial information asymmetry, thereby enhancing the sustainability of financial supply and narrowing the urban-rural income gap (URIG). However, the existence of digital divide may expand the URIG. This paper mainly discusses the mechanism and effect of DIF on the URIG in China, as well as the role of digital divide and digital threshold in it. The results show that the development of DIF has generally narrowed the URIG, but the impact of coverage breadth, usage depth, and digitization level are quite different, and there are also differences in the east, middle and west regions; DIF narrows the URIG by promoting employment and increasing non-agricultural employment; when the first-level digital threshold is crossed, the convergence effect of DIF on the URIG is weakened, and when the second-level digital threshold is crossed, the convergence effect is strengthened. Therefore, to create better conditions for further narrowing the URIG, the government should not only prevent digital financial enterprises from forming an excessively digital threshold by using their monopoly position, but also accelerate the construction of digital financial infrastructure.

Key words: digital inclusive finance (DIF), digital divide, digital threshold, urban-rural income gap (URIG)