Abstract: This paper estimates the preference parameters of the price-independent generalized linear (PIGL) utility function by using Chinese micro household survey data and analyzes the impact of income inequality on structural transformation of industry under different degrees of technology spillover, then it conducts an empirical test with urban panel data. The results of theoretical and numerical simulation show that income inequality is conducive to the increase of service varieties. However, intensified competition among products caused by the increase of substitutable service varieties reduces the relative price of services. Constrained by weak demand, the income effect brought by falling service prices cannot be substantially transformed into demand growth. Consequently, the higher the Gini coefficient, the slower the structural transformation of industry. In this process, technology spillover moderates the relationship between income inequality and structural transformation of industry by affecting service innovation on the supply side. The empirical study also confirms that income inequality inhibits structural transformation of industry, and such inhibition effect continuously strengthens with the improvement of technology spillover. The heterogeneity analysis finds that the inhibitory effect is stronger in less developed regions, regions with low marketization, and small and medium-sized cities, while the moderating effect of technology spillover is higher in developed regions, regions with high marketization, and large cities. Therefore, efforts should be made to improve the income distribution pattern, enhance technology spillover effects, implement differentiated policies according to local conditions, and leverage inter-regional cooperation mechanisms where advanced regions drive backward areas, so as to more effectively promote industrial structure transformation.

Key words: income inequality, Gini coefficient, technology spillover, industrial structural transformation, service varieties