Abstract: Clarifying the influence mechanism of rural collective economic development on farmers' income and quantitatively analyzing the impact effect of rural collective economic development on farmers' income are of great significance for the high-quality development of the rural economy and the overall well-being improvement of farmers. With the panel data from 2015 to 2022, we measure the development level of rural collective economy in Shanxi Province by using the entropy method and explore the specific impact of the development level of rural collective economy in Shanxi Province on farmers' income by using the bidirectional fixed effect model. The result shows that the rural collective economy in Shanxi Province has a positive promoting effect on farmers'income, especially significantly promoting farmers' wage income, net income from family operations and net transfer income. With the improvement of regional urbanization level, industrial structure and human capital level, the effect of promoting increases in farmers' income through the development of rural collective economy will be significantly enhanced. Therefore, we puts forward the following suggestions: Firstly, develop the collective economy through cross-domain linkage and build a new model of win-win cooperation; Secondly, innovate the development of rural collective economy and increase farmers' property income; Thirdly, promote the coordinated improvement of multiple elements to assist the collective economy and increase farmers' income.