Based on provincial panel data of China ranging from 2004 to 2015, this paper has empirically examined the effect of basic public service on the urban–rural income inequality with a system generalised method of moments (sys-GMM). We arrive at the following conclusions: 1) the improvement of public service provision is conducive to narrowing the urban–rural income gap; 2) compared with the ‘hard’ public services (including infrastructure, environmental protection and cultural facilities), the ‘soft’ public services (including education, medical care and social security) play a more significant role in reducing the disparity; 3) the household registration system impairs the welfare brought by the ‘soft’ public services and exacerbates the passive effect of ‘hard’ public services on the income gap; 4) the interactive impact of household registration regulation and public service provision on the income gap is more significant in developed areas. These findings suggest the government should give priority to the improvement of ‘soft’ public services, reevaluate the way of spending on ‘hard’ public services in rural areas and deepen the household registration system reform.

Although the literature finds that renting out farmland can increase farmer’s income, whether lessors’ subjective well-being (SWB) increases or not has been under-analysed. We use data from the 2015 China Household Finance Survey to investigate the relationship between land rental transaction and farmers’ SWB. The results indicate that renting-out farmland does not increase farmers’ SWB if ignoring the types of transaction partners. Further analysis shows that lessors transacting with acquaintances have higher SWB than those transacting with non-acquaintances, and there is no difference in SWB between lessors transacting with non-acquaintances and farmers without land renting-out. This is because although lessors transacting with non-acquaintances obtain higher land rents, they lose the farmland that is the channel of investing in social capitals, which leads to less helps from kin, friends or neighbours when they encounter difficulties. Our analysis implies that lessors’ subjective welfare does not increase even if rural economy and rural residents are commonly regarded to be beneficial from land transfers.