How digitalization and financial development impact eco-efficiency? Evidence from China.

Abstract

The rapid growth of industrial digitalization and financial support are the main driving forces for the green transformation of China's economy. Aiming to explore how digitalization and financial development impact ecological efficiency (eco-efficiency), this study proposes a unified research framework by integrating multiple technologies using the panel data that covered 30 China's provinces from 2006 to 2018. First, China's provincial digital development index is constructed to measure the level of digitalization, and regional eco-efficiency is estimated by a non-radial data envelope analysis (DEA) model. Based on that, the panel data regression model and panel vector autoregression (PVAR) model are used to explore the direct effects and dynamic effect of digitalization and financial development on eco-efficiency, respectively. Then, the threshold regression model is employed to check the threshold effect of the two variables on eco-efficiency. The following conclusions are drawn: (1) Both digitalization and financial development have a significantly positive correlation with regional eco-efficiency, indicating that China's digitalization and financial development in recent years have both improved regional eco-efficiency. (2) Eco-efficiency has positive and longer responses to the impulse coming from digitalization and financial development, and the response of ecological efficiency to financial development is greater than its response to digitalization. (3) Threshold effects exist in the impact mechanism of digitalization on regional eco-efficiency. This indicates that the level of financial support is too low to promote the improvement in ecological efficiency. Eco-efficiency can be improved only to a certain extent. The research conclusions provide a policy reference for improving eco-efficiency and promoting China's green development.