Digital infrastructure construction drives green economic transformation: evidence from Chinese cities

Rapid economic growth in China, fueled by high fossil fuel consumption, has led to significant environmental degradation. A green economic transformation is crucial for sustainable development. Cities, as centers of economic activity, are key to this transition. While existing research focuses on transportation infrastructure's impact, the role of digital infrastructure in green economic development remains under-explored. This study addresses this gap by examining how digital infrastructure construction, specifically through the Broadband China policy, influences urban green economic transformation in China. The study is significant because it provides empirical evidence on the relationship between digital infrastructure and green economic development, offering valuable insights for China and other developing economies.

Prior research predominantly examines the effects of transportation infrastructure on economic and social development, neglecting the unique characteristics and impact mechanisms of digital infrastructure. Most studies on digital infrastructure are qualitative, lacking rigorous empirical analysis of its influence on environmental performance. This study bridges this gap by employing a quantitative approach to investigate the causal relationship between digital infrastructure construction and green economic development.

The study utilizes a staggered difference-in-differences (DID) model, leveraging the Broadband China policy (implemented in 2015) as a quasi-natural experiment. Cities participating in the pilot program constitute the treatment group, while others serve as the control group. The green economic development level is measured using the non-radial directional distance function (NDDF), incorporating capital, labor, energy as inputs, real GDP as desired output, and industrial wastewater and SO2 emissions as undesirable outputs. The NDDF accounts for flexible input and output proportions. The model includes control variables such as per capita GDP, government fiscal expenditure, environmental regulation, fixed asset investment, and foreign direct investment. A parallel trend test ensures the validity of the DID approach. Robustness checks include examining heterogeneous treatment effects using the two-wayfeweights command in Stata, a placebo test with 2000 random samples, and analysis after excluding the effects of other policies by removing low-carbon cities and shortening the policy time window. The influencing mechanism is analyzed by including measures for energy intensity, digital industrialization, and green technology innovation. Heterogeneity analysis is conducted based on geographical location (east, central, west) and economic development level (developed, underdeveloped).

The study's primary finding is that digital infrastructure construction significantly promotes green economic transformation in Chinese cities. This positive effect remains robust after controlling for various factors and applying rigorous robustness checks. The positive impact of digital infrastructure on green economic performance is statistically significant at the 1% level. The analysis of heterogeneous treatment effects confirms the robustness of the findings. The placebo test further strengthens the causal link by showing that the observed effect is not random. Excluding the influence of other policies reaffirms the significant positive impact of digital infrastructure construction on green economic development. Further analysis reveals the mediating roles of energy efficiency, digital industrialization, and green technology innovation. Digital infrastructure contributes to reduced energy intensity, increased digital industrialization, and enhanced green technology innovation, indirectly driving green economic transformation. Heterogeneity analysis indicates that eastern and economically developed cities benefit more from digital infrastructure construction than western and less-developed cities.

The findings underscore the significant role of digital infrastructure in facilitating China's green economic transformation. The positive and robust relationship found between digital infrastructure and green economic performance suggests that investments in digital infrastructure can contribute substantially to environmental sustainability. The mediating mechanisms identified highlight the multi-faceted ways in which digital infrastructure fosters a greener economy. The heterogeneity in treatment effects across regions and economic development levels emphasizes the importance of tailored policy interventions to maximize the benefits of digital infrastructure investments.

This research demonstrates a significant positive link between digital infrastructure construction and green economic transformation in Chinese cities. The findings highlight the importance of digital infrastructure as a driver of sustainable development and suggest policy implications, including increased investment in digital infrastructure, promotion of digital transformation in enterprises, and consideration of energy consumption in digital infrastructure planning. Future research could explore the micro-level impact of digital infrastructure on enterprises and incorporate additional potential influencing channels beyond those examined in this study.

The study's reliance on data from 271 prefecture-level cities may limit the generalizability of findings to smaller municipalities or rural areas. The focus on energy efficiency, industrial digitalization, and green technology innovation as mediating channels is constrained by data availability; future studies could expand this scope. Finally, using the Broadband China policy as a proxy for broader digital infrastructure may not fully capture the diverse facets of digital infrastructure development.