Can Digital Economy Drive Income Level Growth in the Context of Sustainable Development? Fresh Evidence from “Broadband China”

Abstract

In the context of the rapid development of digital economy and the promotion of sustainable development, this paper focuses on the impact of digital economy on income levels. Based on the panel data of 195 prefecture-level cities, the “Broadband China” pilot has been regarded as a natural experiment for the measurement of the digital economy. In this paper, a time-varying DID model was established to evaluate the influential effect of “Broadband China” on income growth. It was found that the coming into service of “Broadband China” has increased the overall income level of the Chinese labor force. Further research found that “Broadband China” has done more to raise the income levels of the high-skilled labor force, thus widening the income gap between the high-, medium-, and low-skilled labor force. “Broadband China” can affect the income growth via two mechanisms, namely, “increasing the entrepreneurship rate” and “leading to an increase in the overall number of professional and skilled labor force in China”. In this case, the entrepreneurship rate of the high-skilled labor force may be higher than that of the medium- and low-skilled labor force due to human capital accumulation. The rapid increase in the high-skilled labor force in technical industries will lead to the situation where their income growth effect is higher than that of the medium- and low-skilled labor force. Based on the above research results, this paper puts forward policy suggestions from three aspects: further accelerating the process of digital economy; improving the institutional environment of the broadband network and standardizing the order of the construction of the broadband network; and further stimulating the entrepreneurial motivation of labor force, paying attention to the problem of skill bias and optimizing the employment structure, balancing efficiency and equity, and contributing to the ultimate sustainable development of developing countries.