Does the digital economy improve comprehensive total factor productivity in China?

Area of Science:

• Economics
• Environmental Science
• Technological Innovation

Background:

• High-quality economic development is increasingly linked to total factor productivity (TFP).
• The role of the digital economy in enhancing TFP is a critical concern for China.
• Measuring comprehensive TFP (CTFP) requires accounting for undesirable outputs.

Purpose of the Study:

• To construct a novel measure for CTFP using an SBM undesirable Malmquist-Luenberger index.
• To empirically investigate the impact of the digital economy (DIG) on CTFP in China.
• To explore the mediating mechanisms and regional heterogeneity of the DIG's effect on CTFP.

Main Methods:

• Developed a slack-based measure (SBM) undesirable Malmquist-Luenberger index for CTFP.
• Utilized a fixed effects (FE) panel model and a mediating effect model with Chinese provincial data (2011-2020).
• Conducted robustness tests and heterogeneity analysis across regions.

Main Results:

• CTFP grew by an average of 3.9%, driven primarily by technological progress (5.0%), despite a decline in technical efficiency (-1.1%).
• The digital economy (DIG) demonstrates a significant positive impact on CTFP.
• Mechanisms include technological innovation, factor endowment structure, and educational levels, with effects observed across eastern, central, and western China.

Conclusions:

• Technological progress is the key driver of CTFP growth in China.
• The digital economy is a vital catalyst for enhancing comprehensive total factor productivity.
• Findings offer valuable insights for environmental governance and high-quality economic development strategies.