Digital economy and economic competitive pressure on local governments: Evidence from China
Description
For decades, fiscal decentralization and gross domestic product growth targeting have resulted in fierce economic competition among local governments in China, putting tremendous economic competitive pressure on them. The latter has serious social and economic implications and is a major issue for policymakers. This study analyzes data from China’s 30 provinces for 2011–2021. It demonstrates that digital economic development could considerably reduce economic, competitive pressure on local governments, with trade openness and entrepreneurial dynamism serving as impact mechanisms. This study also found that the alleviating effects are more pronounced in regions with a poor innovation environment, a less developed economy, or lagging human resources. These findings emphasize the important role of the digital economy in increasing regional competitiveness and reducing regional disparities.
Files
Steps to reproduce
The final sample includes 30 Chinese provinces, municipalities, and autonomous regions, spanning 2011–2021 (excluding Hainan Island). The information comes from three sources. The first source is Peking University’s Digital Finance Research Center’s Digital Financial Inclusiveness Development Index (Guo et al., 2020). The second source is the CSMAR database, which contains both year-end loan amounts from financial institutions and the number of registered private companies. The third source is China’s National Bureau of Statistics. Some indicators are in logarithmic format. Some regions have lower levels of digital economic development than the average, resulting in negative values in the principal component analysis. We apply a moving smoothing adjustment (X + 6).