Digital Transformation and Urban Green Development: Evidence from China’s Data Factor Marketization

Abstract

Data are the core element of digital transformation. Data factor marketization (DFM) is critical in the process of digital transformation, which promotes urban green development. This paper analyzes the role of digitization in urban environmental sustainability. We investigate the effects of DFM on environmental pollution (EP) using a difference-in-differences approach and data from 283 cities in China from 2006 to 2019. The findings reveal that cities implementing DFM demonstrate an average reduction in EP of 2.67%. The mechanism behind DFM lowering EP involves fostering green innovation, increasing public awareness of environmental issues, attracting IT professionals, optimizing the industrial structure, and enhancing digital finance capabilities. Large cities, cities in the south, and those not primarily dependent on natural resources exhibit a more pronounced reduction in EP through DFM. Implementing policies related to digital infrastructure and enhancing the protection of urban intellectual property rights further amplifies the effect of DFM in reducing pollution. Additionally, this effect exhibits spatial spillover effects. This study contributes to the existing literature by (1) demonstrating DFM’s role in improving urban environmental quality in China through digital technology and market mechanisms, thereby aligning economic growth with ecological sustainability; (2) emphasizing the importance of public engagement in environmental stewardship through increased awareness and community participation in policymaking, as well as fostering social inclusion and ecological conservation; (3) emphasizing spatial spillover effects, the importance of inter-city collaboration in environmental policies, and advocating for comprehensive strategies to achieve broader environmental improvements across urban areas.