The Widening Role of the Digital Economy on Regional Income Differences - Evidence from the National Pilot Zone for Innovative Development of the Digital Economy

Abstract

A growing body of research suggests that the digital economy may create opportunities to combat income inequality. However, these studies have focused more on the difference between countryside and city areas, neglecting the intervene of the state, regional differences and labour market in digital economy. Therefore, this paper collects data on the average income of different cities and the average wage of their digital economy workforce, and uses the Theil Index, DID and mediated-effects methods to study the setup of the National Pilot Zone for the Innovative Development of the Digital Economy as well as the status of income equality within the pilot zone. The paper also analyses heterogeneity based on geographic location, and uses a mediation effect model to measure the role of the income of digital economy practitioners in the impact of the National Pilot Zone for the Innovative Development of the Digital Economy on inter-regional income disparities. Study finds that the pilot zone widens the inter-regional income gap. This result is caused by the uneven spatial distribution between regions and industries. Labour wages in the relevant industries are also an important factor mediating the effect between developing the digital economy and the elimination of income inequality.