Effects of ICT diffusion on environmental pollution: analysis of industrial reallocation effects in China

The development of information and communication technology (ICT) has brought about fundamental changes in social progress worldwide. Using panel data from 288 Chinese cities for the period from 1999 to 2019, this study evaluates the effect of the pilot Broadband China Strategy (BCS) program on environmental pollution. We find that BCS significantly reduces environmental pollution, and that this effect is stronger in eastern China and in Chinese cities with higher financial progress or broadband development. Interestingly, the negative effect of BCS on environmental pollution decreases with the improvement of human capital in the cities. We further discuss industrial efficiency and reallocation mechanisms and ascertain that BCS affects environmental pollution in pilot cities not only through the efficiency mechanism as established in the existing literature but also through the industrial scale change and labor transfer between different industries, which we refer to as the industrial reallocation mechanism in this study. Specifically, via the industrial efficiency and reallocation mechanisms, the implementation of the BCS increases the scale and efficiency of the primary and tertiary industries but decreases the scale and efficiency of the secondary industry. This reduction in the secondary industry results in a decline in environmental pollution. It indicates that promoting the balanced development of a country's ICT infrastructure and pushing forward ICT diffusion can help alleviate environmental pollution by industrial reallocation and efficiency improvement, especially in nations with significant regional economic and technological differences.