Towards inclusive green growth: does digital economy matter?

In this decade, China has been pursuing an inclusive green growth strategy. Concurrently, the digital economy, which relies on the Internet of Things, big data, and artificial intelligence, has experienced explosive growth in China. The digital economy’s capacity to optimize resource allocation and reduce energy consumption potentially makes it a conducive channel towards sustainability. Using the panel data of 281 cities in China from 2011 to 2020, we theoretically and empirically explore the impact of the digital economy on inclusive green growth. Firstly, we theoretically analyze the potential impact of the digital economy on inclusive green growth using two hypotheses: accelerating green innovation and promoting the industrial upgrading effect. Subsequently, we measure the digital economy and inclusive green growth of Chinese cities using Entropy-TOPSIS and DEA approaches, respectively. Then, we apply traditional econometric estimation models and machine learning algorithms to our empirical analysis. The results show that China’s high-powered digital economy significantly promotes inclusive green growth. Moreover, we analyze the internal mechanisms behind this impact. We find that innovation and industrial upgrading are two plausible channels that explain this effect. Additionally, we document a nonlinear feature of diminishing marginal effects between the digital economy and inclusive green growth. The heterogeneity analysis shows that the contribution weight of the digital economy to inclusive green growth is more remarkable in eastern region cities, large and medium-sized cities, and cities with high marketization. Overall, these findings shed more light on the digital economy-inclusive green growth nexus and provide new insights into understanding the real effects of the digital economy on sustainable development.