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

ABSTRACT

Total factor productivity is an important symbol of high-quality economic development. At present, the question of whether the digital economy can infuse fresh impetus into enhancing total factor productivity has emerged as a prominent concern in China. This paper constructs a new undesirable output to measure comprehensive total factor productivity (CTFP) with the slack-based measure (SBM) undesirable Malmquist-Luenberger index by using 2011-2020 Chinese provincial panel data. Then, this paper explores the impact of the digital economy (DIG) on CTFP with a fixed effects (FE) panel model and a mediating effect model. The results show that CTFP increases by an average of 3.9%, technical efficiency contributes -1.1%, and the contribution rate of technological progress is 5.0%. Technological progress is the main source of CTFP growth. The empirical findings show that the DIG has a positive and significant impact on CTFP. This paper conducts various robustness tests, and the results remain consistent with the previous conclusion. Moreover, mechanism tests suggest that the promoting effect of the DIG on CTFP can be attributed to three main effects technological innovation, the factor endowment structure and the educational level. Furthermore, the results of heterogeneity analysis demonstrate that the promoting effect of the DIG on CTFP exists in China's eastern, central and western regions. The findings of this research can serve as a valuable reference for informing decision-making processes related to environmental governance and high-quality economic development in China.