Abstract: On the basis of a theoretical analysis, this paper takes the smart city pilot polciy as a quasi-natural experiment of China’s digital economy development. Based on the panel data of China’s prefecture-level cities and the A-share listed companies from 2007 to 2020, it studies the impact, mechanism and difference of digital economy development on labor income inequality with the help of a staggered difference-in-difference model. The findings show that the development of digital economy can significantly reduce the inequality of labor income, which is still valid after a series of robustness tests. From the perspective of impacting mechanism, the development of digital economy can reduce the inequality of labor income by improving the urban human capital level and reducing the urban labor productivity difference. The heterogeneity analysis reveals that in the eastern region, the secondary industry, the non-technical intensive industries and the state-owned enterprises, the development of digital economy has a stronger impact on labor income inequality. This research conclusion provides beneficial enlightenment for grasping the development opportunity of digital economy, narrowing the labor income gap, and ensuring the realization of the phased goal of common prosperity.

Key words: smart city pilot, digital economy development, labor income inequality, human capital level, labor productivity difference