Digitalization in prefabricated constructions and reducing carbon emission: empirical evidence from China

Taking the implementation of digitalization in prefabricated constructions (DPC) as an exogenous shock, this study utilizes provincial panel data of China from 1997 to 2019, and uses the difference-in-differences model to identify the causal effect of DPC on carbon emissions in the construction industry (CECI). This study shows that DPC effectively reduces CECI with the results withstanding rigorous testing, including parallel trend tests, placebo tests, and a heterogeneous time-varying treatment test based on Bacon decomposition and the DIDm approach. The mechanism test confirms that DPC reduces CECI through two channels, which are improving existing building technologies and promoting better management capabilities. At the same time, further analyses show that the carbon emissions reduction effect of DPC is more pronounced in regions with a higher degree of marketization, financial development, human capital and environmental regulation. This study contributes to understanding the underlying mechanisms between DPC and CECI, providing new insights for the deeper integration of digital technologies and the construction industry. It offers new avenues for revitalizing the construction sector and facilitating achieving global carbon emissions reduction goals.