Currently, rural households striving to develop modern agriculture face a dual predicament of inadequate endogenous drive and uneven external support. Meanwhile, structural bottlenecks, including inefficient land resource allocation and hindered labor mobility, constrain rural economic vitality. Leveraging the bridging role of farmer cooperatives to connect with and empower smallholders, thus tackling resource misallocation and income growth stagnation, has emerged as a strategic approach for sustainable income growth in rural households.

Drawing on the neo-endogenous development theory, this paper constructs a mechanistic framework linking farmer cooperatives to rural households’ income growth through village-level spillover effects. Using the China Labor-force Dynamics Survey (CLDS) data for empirical validation and triangulating findings with the China Rural Revitalization Survey (CRRS), the China Center for Agricultural Development-Qiyan Database (CCAD), and Chinese firm registration data, this paper demonstrates that farmer cooperatives significantly increase per capita household income within villages. Mechanism testing reveals differential income-enhancing paths: For large-scale farming households, cooperatives facilitate endogenous land resource consolidation toward efficient operators by aligning them with agricultural subsidies and exogenous socialized services, thereby boosting agricultural operational income; for smallholder households constrained by comparative agricultural disadvantages, cooperatives facilitate the redistribution of endogenous labor resources by releasing surplus agricultural labor and linking households to exogenous non-farm employment opportunities, thus enhancing non-farm labor income.

The marginal contributions of this paper are as follows: First, it focuses on micro-level endogenous resource integration and exogenous market expansion, and theoretically deconstructs how farmer cooperatives promote rural households’ income growth, expanding and refining research approaches in this field. Second, by including all households in villages with farmer cooperatives in the treatment group, it accounts for income-enhancing spillover effects, providing valuable empirical additions for analyzing cooperatives’ beneficiaries and mechanisms. Third, it examines the practical effect of the development of farmer cooperatives from both income-enhancing and distributive angles, aiming to offer more refined empirical evidence for optimizing rural economic development paths on the new journey toward common prosperity.