Digital economy as a catalyst for low-carbon transformation in China: new analytical insights

Abstract

To obtain a consistent estimate of the impact of digital economy on the carbon total factor productivity (CTFP) is important not only in the academic field but also for the policymakers. However, the existence of endogeneity issue makes it challenging. This paper constructs a novel analysis framework that can measure the CTFP as well as the impact of digital economy simultaneously after addressing the endogeneity. By employing the endogenous stochastic frontier analysis method, the findings indicate that digital economy has a positive and significant effect on CTFP, which persists when different production functions and instrumental variables are employed. Mechanism analysis reveals that the positive impact is facilitated by changes in production methods and improvements in urban environmental regulatory governance. Moreover, the effect of digital economy on CTFP is more pronounced in regions with higher environmental awareness among residents, lower resource abundance, and higher levels of human capital. The results provide valuable policy insights into the utilization of the digital economy to achieve green and high-quality development in China, including to promote the regional balanced development of digital economy and so on.