The digital economy, market integration and environmental gains

Abstract

Environmental governance has always been a focus of academic discourse. Innovatively, this study explores the environmental gains of the digital economy through the lens of market integration. Here, we provide several novel findings using staggered difference-in-differences and dynamic spatial Durbin models based on urban panel data from China from 2011 to 2019. First, the digital economy significantly improves air pollution, resulting in environmental gains for neighboring cities. Second, a heterogeneity analysis shows that the digital economy's environmental gains are more pronounced in regions with high endowment structures and urbanization rates. Finally, our mechanism analysis indicates that as commodity market segmentation and capital factor market distortion increase, the digital economy becomes more capable of improving air quality. The alleviation of capital factor market distortion and commodity market segmentation emerges as the mechanism through which the digital economy exerts its environmental gains.