The Effect of Digitization on Economic Sustainable Growth in Shandong Province of China

Abstract

In recent years, the digital economy has emerged as a widely debated economic topic, with China experiencing rapid development in this sector. As a pioneering region and microcosm of China’s economy, studying the impact of Shandong’s digitization level on economic development holds significant academic and practical importance. Based on the annual panel data for the 17 cities of Shandong Province from 2001 to 2019, a digitization index (DI) is generated through the entropy weight method (EWM). Then, the effects of DI on GDP and total factor productivity (TFP) are empirically analyzed through various regression models, including fixed effect and spatial regression techniques. Results indicate that: (1) DI has a direct effect on TFP and an indirect effect on GDP; (2) regional differences are significant but minimal, with most concentrated effects being relatively large in recent periods; (3) negative spatial spillovers in both GDP and TFP are caused by negative spillovers in DI. It is recommended that local governments carefully consider the negative spillover effects of digital development when formulating digitization policies. While concentrating resources on advancing digitization in high-priority cities, equal emphasis should be placed on promoting the dissemination of digital products and services to surrounding areas. This approach is crucial for mitigating the risk of regional economic disparities caused by the potential siphoning effect of digital development.