China's Digital Economy: Examining Its Impact on Inequality Through the Lens of Employment, Income Disparity, Innovation, and Competition

Abstract

This paper examines the impact of Chinas digital economy on inequality, focusing on employment, income inequality, innovation, and competition. Overall, the digital economy creates inequality in individuals and firms. It exacerbates the income disparity between high-skilled and low-skilled workers, and/or across different regions. It also creates an oligopolistic structure in the digital markets and new industries, where big firms use network effects and incumbency advantage to reduce competition. Therefore, challenges arise for antitrust enforcement due to the dynamic nature of the digital economy and attention platforms. Nevertheless, the digital economy optimizes employment structure, having a net effect of greater creation effect than substitution effect. It also increases innovation efficiency and opportunities for smaller players in the traditional sectors. Therefore, the digital economy has positive implications for economic growth. Overall, it is crucial to encourage equality and stimulate economic growth by implementing certain policies, including measures to enhance labor quality, reduce regional disparities, and strengthen antitrust regulations.