Promoting the Real Economy by the Integration of Digital Technology and the Real Economy: On the Influence to Biased Technical Change

Abstract

The deep integration of digital technology and the real economy is a vital engine for boosting high-quality growth of the real economy. As a result, it is necessary to investigate the effects of this integration on the real economy. This paper develops a two-sector model that incorporates the production sector and the technology research and development sector, taking into account both the factor attribute and the technical attribute of digital technology. Digital capital, general capital, skilled labor, and unskilled labor are considered as intermediate inputs in the model. Furthermore, this paper examines the effects of two integration modes, i.e., factor-based integration and technology-based integration, on the development of the real economy and the biased technical change from a theoretical perspective. Empirical tests are conducted to support the analysis. The findings indicate that both factor-based integration and technology-based integration contribute positively to the development of the real economy, although technology-based integration exhibits diminishing marginal effects. Heterogeneity analysis reveals that factor-based integration plays a more significant role in promoting the development of the real economy in regions with geographical advantages, low levels of human resources, high marketization levels, or low market segmentation. On the other hand, technology-based integration assumes a greater role in facilitating the development of the real economy in regions with geographical disadvantages, low costs on human resources, low marketization levels, or high market segmentation. Further analysis demonstrates that the integration of digital technology and the real economy leads to digital capital-biased technical change and skilled labor-biased technical change. Therefore, it is imperative for the public sector to encourage the expansion of both factor-based integration and technology-based integration in the real economy. Additionally, it is also important to develop a reasonable industry layout plan and enhance the skill level of workers to address the rising demand for relevant factors resulting from changes in the biased technical change.

Keywords

digital capital / factor-based integration / technology-based integration / digital-real economy integration / biased technical change

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2024 Higher Education Press