Does digitalization mitigate regional inequalities? Evidence from China

Abstract

Regional inequality significantly influences sustainable development and human well-being. In China, there exists pronounced regional disparities in economic and digital advancements; however, scant research delves into the interplay between them. By analyzing the economic development and digitalization gaps at regional and city levels in China, extending the original Cobb-Douglas production function, this study aims to evaluate the impact of digitalization on China’s regional inequality using seemingly unrelated regression. The results indicate a greater emphasis on digital inequality compared to economic disparity, with variable coefficients of 0.59 for GDP per capita and 0.92 for the digitalization index over the past four years. However, GDP per capita demonstrates higher spatial concentration than digitalization. Notably, both disparities have shown a gradual reduction in recent years. The southeastern region of the Hu Huanyong Line exhibits superior levels and rates of economic and digital advancement in contrast to the northwestern region. While digitalization propels economic growth, it yields a nuanced impact on achieving balanced regional development, encompassing both positive and negative facets. Our study highlights that the marginal utility of advancing digitalization is more pronounced in less developed regions, but only if the government invests in the digital infrastructure and education in these areas. This study’s methodology can be utilized for subsequent research, and our findings hold the potential to the government’s regional investment and policy-making.

Keywords

Regional inequality / Regional disparities / Digital divide / Digitalization / Sustainable development / Economic growth / Seemingly unrelated regression

Declaration of Competing Interests

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgements

This research was funded by National Natural Science Foundation of China (Grants No. 42171210, 42371194) and Major Project of Key Research Bases for Humanities and Social Sciences Funded by the Ministry of Education of China (Grant No. 22JJD790015).

References

[1] Allen, J. P. 2017. Why is inequality increasing in a digital world?. J.P. Allen (Ed.), Technology and Inequality: Concentrated Wealth in a Digital World, Springer International Publishing, Cham, pp.1-23.

[2] Alm, E., Colliander, N., Deforche, F., Lind, F., Stohne, V., Sundström, S., 2016. Digitizing Europe: Why Northern European Frontrunners Must Drive Digitization of the EU Economy. The Boston Consulting Group.

[3] Anselin, L., 2001. Spatial Econometrics: A Companion to Theoretical Econometrics. Blackwell Publishing Ltd., Hoboken NJ.

[4] Autio, E, Mudambi, R, Yoo, Y., 2021. Digitalization and globalization in a turbulent world: centrifugal and centripetal forces. Glob. Strategy J., 11(1), 3-16.

[5] Ballas, D, Dorling, D, Hennig, B., 2017. Analysing the regional geography of poverty, austerity and inequality in Europe: a human cartographic perspective. Reg. Stud., 51(1), 174-185.

[6] Bauer, J. M., 2018. The Internet and income inequality: socio-economic challenges in a hyperconnected society. Telecommun. Policy 42(4), 333-343.

[7] Beaunoyer, E, Dupéré, S, Guitton, M. J., 2020. COVID-19 and digital inequalities: reciprocal impacts and mitigation strategies. Comput. Hum. Behav., 111, 106424.

[8] Berger, T, Frey, C. B., 2016. Did the computer revolution shift the fortunes of US cities? Technology shocks and the geography of new jobs. Reg. Sci. Urban Econ., 57, 38-45.

[9] Bertschek, I, Briglauer, W, Hüschelrath, K, Kauf, B, Niebel, T., 2015. The economic impacts of broadband internet: a survey. Rev. Netw. Econ., 14(4), 201-227.

[10] Blank, G, Graham, M, Calvino, C., 2018. Local geographies of digital inequality. Soc. Sci. Comput. Rev., 36(1), 82-102.

[11] Breusch, T. S., Pagan, A. R., 1980. The Lagrange multiplier test and its applications to model specification in econometrics. Rev. Econ. Stat., 47(1), 239-253.

[12] CAICT, 2022. China Digital Economy Development Report. CAICT.

[13] Cairncross, F., 1997. The Death of Distance: How the Communications Revolution Will Change Our Lives. Harvard Business School Press, Boston, MA

[14] Canh, N. P., Schinckus, C, Thanh, S. D., Hui Ling, F. C., 2020. Effects of the internet, mobile, and land phones on income inequality and The Kuznets curve: cross country analysis. Telecommun. Policy 44(10), 102041.

[15] Celbis, M. G., de Crombrugghe, D., 2018. Internet infrastructure and regional convergence: evidence from Turkey. Pap. Reg. Sci., 97(2), 387-409.

[16] Chen, M, Gong, Y, Li, Y, Lu, D, Zhang, H., 2016. Population distribution and urbanization on both sides of the Hu Huanyong Line: answering the Premier's question. J. Geogr. Sci., 26(11), 1593-1610.

[17] Cheng, Y, Liu, H, Wang, S, Cui, X, Li, Q., 2021. Global action on SDGs: policy review and outlook in a post-pandemic era. Sustainability 13(11), 6461.

[18] Ciffolilli, A, Muscio, A., 2018. Industry 4.0: national and regional comparative advantages in key enabling technologies. Eur. Plan. Stud., 26(12), 2323-2343.

[19] CNNIC, 2022. The 49th statistical report on China’s internet development. CNNIC.

[20] Compaine, B.M., 2001. The Digital Divide: Facing a Crisis or Creating a Myth?. MIT Press, Cambridge, MA.

[21] Creutzig, F, Acemoglu, D, Bai, X, Edwards, P. N., Hintz, M. J., Kaack, L. H., Kilkis, S, Kunkel, S, Luers, A, Milojevic-Dupont, N., 2022. Digitalization and the anthropocene. Annu. Rev. Environ. Resour., 47, 479-509.

[22] Dettori, B, Marrocu, E, Paci, R., 2012. Total factor productivity, intangible assets and spatial dependence in the European regions. Reg. Stud., 46(10), 1401-1416.

[23] Devkota, K. R., 2021. Inequalities reinforced through online and distance education in the age of COVID-19: the case of higher education in Nepal. Int. Rev. Educ., 67(1), 145-165.

[24] Dong, L, Wu, H., 2017. Mobile Internet and regional development in China. Environ. Plan. A 49(4), 725-727.

[25] Douglas, P. H., 1976. The Cobb-Douglas production function once again: its history, its testing, and some new empirical values. J. Polit. Econ., 84(5), 903-915.

[26] Duan, Y, Dietzenbacher, E, Los, B, Dai, R., 2023. Regional inequality in China during its rise as a giant exporter: a value chain analysis. J. Reg. Sci., 63(1), 148-172.

[27] Ellison, N. B., Steinfield, C, Lampe, C., 2011. Connection strategies: social capital implications of Facebook-enabled communication practices. New Media Soc., 13(6), 873-892.

[28] Eva, M, Cehan, A, Corodescu-Roșca, E, Bourdin, S., 2022. Spatial patterns of regional inequalities: empirical evidence from a large panel of countries. Appl. Geogr., 140, 102638.

[29] Friedman, T. L., 2006. The World is Flat [updated and expanded]: A Brief History of the Twenty-first Century. Oxford, Macmillan

[30] Fu, B, Meadows, M. E., Zhao, W., 2022. Geography in the Anthropocene: transforming our world for sustainable development. Geogr. Sustain., 3(1), 1-6.

[31] Fujita, M, Hu, D. P., 2001. Regional disparity in China 1985-1994: the effects of globalization and economic liberalization. Ann. Reg. Sci., 35(1), 3-37.

[32] Georgescu, I, Kinnunen, J. 2021. The digital effectiveness on economic inequality: a computational approach. A.M. Dima, F. D'Ascenzo (Eds.), Business Revolution in a Digital Era, Springer International Publishing, Cham, pp.223-239.

[33] Gómez-Barroso, J. L., Marbán-Flores, R., 2020. Telecommunications and economic development–The 21st century: making the evidence stronger. Telecommun. Policy 44(2), 101905.

[34] Grimes, S., 2005. How well are Europe's rural businesses connected to the digital economy?. Eur. Plan. Stud., 13(7), 1063-1081.

[35] Haefner, L, Sternberg, R., 2020. Spatial implications of digitization: state of the field and research agenda. Geogr. Compass 14(12), e12544.

[36] Hargittai, E. 2018. The digital reproduction of inequality. D.B. Grusky, S. Szelenyi (Eds.), The Inequality Reader: Contemporary and Foundational Readings in Race, Class, and Gender, Routledge, New York, pp.660-670.

[37] Harris, R. D., Tzavalis, E., 1999. Inference for unit roots in dynamic panels where the time dimension is fixed. J. Econom., 91(2), 201-226.

[38] He, S, Bayrak, M. M., Lin, H., 2017. A comparative analysis of multi-scalar regional inequality in China. Geoforum 78, 1-11.

[39] He, S. W., Fang, C. L., Zhang, W. T., 2017. A geospatial analysis of multi-scalar regional inequality in China and in metropolitan regions. Appl. Geogr., 88, 199-212.

[40] Heeks, R., 1999. Information and Communication Technologies, Poverty and Development. Institute for Development Policy and Management, University of Manchester, Manchester

[41] Hu, S, Zeng, G, Cao, X, Yuan, H, Chen, B., 2021. Does technological innovation promote green development? A case study of the Yangtze River Economic Belt in China. Int. J. Environ. Res. Public Health 18(11), 6111.

[42] Hu, S, Zhao, R, Cui, Y, Zhang, D, Ge, Y., 2023. Identifying the uneven distribution of health and education services in China using open geospatial data. Geogr. Sustain., 4(2), 91-99.

[43] ITU, 2022. World Telecommunication/ICT Indicators Database 2021, 25th ed.

[44] Kanbur, R, Zhang, X., 2005. Fifty years of regional inequality in China: a journey through central planning, reform, and openness. Rev. Dev. Econ., 9(1), 87-106.

[45] Katz, M. L., Shapiro, C., 1985. Network externalities, competition, and compatibility. Am. Econ. Rev., 75(3), 424-440.

[46] Khan, M. A., Khan, M. Z., Zaman, K, Arif, M., 2014. Global estimates of energy-growth nexus: application of seemingly unrelated regressions. Renew. Sustain. Energy Rev., 29, 63-71.

[47] Le Gallo, J, Dall'erba, S., 2006. Evaluating the temporal and spatial heterogeneity of the European Convergence Process, 1980–1999. J. Reg. Sci., 46(2), 269-288.

[48] Li, G, Fang, C., 2014. Analyzing the multi-mechanism of regional inequality in China. Ann. Reg. Sci., 52(1), 155-182.

[49] Li, Y. R., Wei, Y. H. D., 2010. The spatial-temporal hierarchy of regional inequality of China. Appl. Geogr., 30(3), 303-316.

[50] Lin, J, Yu, Z, Wei, Y. H. D., Wang, M. F., 2017. Internet access, spillover and regional development in China. Sustainability 9(6), 946.

[51] Liu, H, Fang, C, Fan, Y., 2020. Mapping the inequalities of medical resource provision in China. Reg. Stud. Reg. Sci., 7(1), 568-570.

[52] Liu, H, Fang, C, Gao, Q., 2020. Evaluating the real-time impact of COVID-19 on cities: China as a case study. Complexity 2020, 8855521.

[53] Liu, H, Fang, C, Sun, S., 2017. Digital inequality in provincial China. Environ. Plan. A 49(10), 2179-2182.

[54] Liu, H, Liu, J, Li, M, Gou, P, Cheng, Y., 2022. Assessing the evolution of PM_2.5 and related health impacts resulting from air quality policies in China. Environ. Impact Assess. Rev., 93, 106727.

[55] Liu, R, Li, T, Greene, R., 2020. Migration and inequality in rental housing: affordability stress in the Chinese cities. Appl. Geogr., 115, 102138.

[56] Löfving, L, Kamuf, V, Heleniak, T, Weck, S, Norlén, G., 2022. Can digitalization be a tool to overcome spatial injustice in sparsely populated regions? The cases of Digital Västerbotten (Sweden) and Smart Country Side (Germany). Eur. Plan. Stud., 30(5), 917-934.

[57] Loo, B. P. Y., Wang, B., 2017. Progress of e-development in China since 1998. Telecommun. Policy 41(9), 731-742.

[58] Lu, M, Wang, E., 2002. Forging ahead and falling behind: changing regional inequalities in post-reform China. Grow. Change 33(1), 42-71.

[59] Luo, S, Yimamu, N, Li, Y, Wu, H, Irfan, M, Hao, Y., 2023. Digitalization and sustainable development: how could digital economy development improve green innovation in China?. Bus. Strategy Environ., 32(4), 1847-1871.

[60] Maiti, D, Castellacci, F, Melchior, A. 2020. Digitalisation and Development: Issues for India and Beyond. Springer Singapore, Singapore, pp.3-29.

[61] Martin, R, Sunley, P., 2006. Path dependence and regional economic evolution. J. Econ. Geogr., 6(4), 395-437.

[62] Mim, S. B., Jeguirim, M. 2022. Do ICT help to alleviate inequality? New empirical evidence for developing countries. M.S.B. Ali (Ed.), Digitalization and Economic Development: Insight from Developing Countries, Routledge, London, pp.47-73.

[63] Morgan, K., 2004. The exaggerated death of geography: learning, proximity and territorial innovation systems. J. Econ. Geogr., 4(1), 3-21.

[64] Moriset, B, Malecki, E. J., 2009. Organization versus space: the paradoxical geographies of the digital economy. Geogr. Compass 3(1), 256-274.

[65] Morrar, R, Arman, H, Mousa, S., 2017. The fourth industrial revolution (Industry 4.0): a social innovation perspective. Technol. Innov. Manag. Rev., 7(11), 12-20.

[66] Mueller, M, Grindal, K., 2019. Data flows and the digital economy: information as a mobile factor of production. Digit. Policy Regul. Gov., 21(1), 71-87.

[67] Neogi, C. 2020. Effect of ICT on the performance of Indian States in terms of human development indices. D. Maiti, F. Castellacci, A. Melchior (Eds.), Digitalisation and Development: Issues for India and Beyond, Springer Singapore, Singapore, pp.287-318.

[68] Niebel, T., 2018. ICT and economic growth – comparing developing, emerging and developed countries. World Dev., 104, 197-211.

[69] Nijman, J, Wei, Y. D., 2020. Urban inequalities in the 21st century economy. Appl. Geogr., 117, 102188.

[70] Ozturk, I, Ullah, S., 2022. Does digital financial inclusion matter for economic growth and environmental sustainability in OBRI economies? An empirical analysis. Resour. Conserv. Recycl., 185, 106489.

[71] Pan, X, Guo, S, Han, C, Wang, M, Song, J, Liao, X., 2020. Influence of FDI quality on energy efficiency in China based on seemingly unrelated regression method. Energy 192, 116463.

[72] Pandey, B, Brelsford, C, Seto, K. C., 2022. Infrastructure inequality is a characteristic of urbanization. Proc. Natl. Acad. Sci. U.S.A., 119(15), e2119890119.

[73] Peng, J, Peng, L, Chen, T, Xia, H., 2018. Regional inequalities in comprehensive development in China from 1992 to 2013: comparative estimation based on statistical and DMSP/OLS data. Grow. Change 49(4), 743-761.

[74] Phillips, P. C., Perron, P., 1988. Testing for a unit root in time series regression. Biometrika 75(2), 335-346.

[75] Pollack Ichou, R., 2018. Can MOOCs reduce global inequality in education?. Australas. Mark. J., 26(2), 116-120.

[76] Randall, L, Berlina, A, Teräs, J, Rinne, T, Randall, L, Berlina, A, Teräs, J, Rinne, T., 2018. Digitalisation as a tool for sustainable nordic regional development: Preliminary literature and policy review. Discussion Paper Prepared for Nordic Thematic Group for Innovative and Resilient Regions, Stockholm

[77] Razzaq, A, Yang, X., 2023. Digital finance and green growth in China: appraising inclusive digital finance using web crawler technology and big data. Technol. Forecast. Soc. Change 188, 122262.

[78] Richmond, K, Triplett, R. E., 2018. ICT and income inequality: a cross-national perspective. Int. Rev. Appl. Econ., 32(2), 195-214.

[79] Rietveld, P, Vickerman, R., 2004. Transport in regional science: the “death of distance” is premature. Pap. Reg. Sci., 83(1), 229-248.

[80] Rotman, D., 2014. Technology and inequality. Technol. Rev., 117(6), 52-60.

[81] Sabbagh, K, Friedrich, R, El-Darwiche, B, Singh, M, Ganediwalla, S, Katz, R. 2012. Maximizing the impact of digitization. S. Dutta, B. Bilbao-Osorio (Eds.), The Global Information Technology Report 2012: Living in a Hyperconnected WorldWorld Economic Forum, pp.121-133.

[82] Sabbagh, K, Friedrich, R, El-Darwiche, B, Singh, M, Koster, A. 2013. Digitization for economic growth and job creation: regional and industry perspectives. B. Bilbao-Osorio, S. Dutta, B. Lanvin (Eds.), The Global Information Technology Report 2013: Growth and Jobs in a Hyperconnected WorldWorld Economic Forum, pp.35-42.

[83] Sachs, J, Schmidt-Traub, G, Kroll, C, Lafortune, G, Fuller, G, Woelm, F., 2021. Sustainable Development Report 2020: The Sustainable Development Goals and Covid-19 includes the SDG Index and Dashboards. Cambridge University Press, Cambridge

[84] Salemink, K, Strijker, D, Bosworth, G., 2017. Rural development in the digital age: a systematic literature review on unequal ICT availability, adoption, and use in rural areas. J. Rural Stud., 54, 360-371.

[85] Siregar, Y. P., 2020. Does digital financial inclusion affect inequality?. Master thesis, KDI School, Seoul

[86] Song, Y, Qian, C. F., Pickard, S., 2021. Age-related digital divide during the COVID-19 pandemic in China. Int. J. Environ. Res. Public Health 18(21), 11285.

[87] Sujarwoto, S, Tampubolon, G., 2016. Spatial inequality and the Internet divide in Indonesia 2010–2012. Telecommun. Policy 40(7), 602-616.

[88] Tchamyou, V. S., Erreygers, G, Cassimon, D., 2019. Inequality, ICT and financial access in Africa. Technol. Forecas. Soc. Change 139, 169-184.

[89] TRI, 2020. Digital China Report (in Chinese).

[90] Van Dorn, A, Cooney, R. E., Sabin, M. L., 2020. COVID-19 exacerbating inequalities in the US. Lancet 395(10232), 1243.

[91] Venables, A. J., 2001. Geography and international inequalities: the impact of new technologies. J. Ind. Compet. Trade 1(2), 135-159.

[92] Vu, K. M., 2011. ICT as a source of economic growth in the information age: empirical evidence from the 1996–2005 period. Telecommun. Policy 35(4), 357-372.

[93] Wang, D, Zhou, T, Wang, M., 2021. Information and communication technology (ICT), digital divide and urbanization: evidence from Chinese cities. Technol. Soc., 64, 101516.

[94] Wei, K, Yao, S, Liu, A., 2009. Foreign direct investment and regional inequality in China. Rev. Dev. Econ., 13(4), 778-791.

[95] Wei, Y. D., 2015. Spatiality of regional inequality. Appl. Geogr., 61, 1-10.

[96] Wei, Y. D., Li, H, Yue, W., 2017. Urban land expansion and regional inequality in transitional China. Landsc. Urban Plan., 163, 17-31.

[97] Wei, Y. D., Wu, Y, Liao, F. H., Zhang, L., 2020. Regional inequality, spatial polarization and place mobility in provincial China: a case study of Jiangsu province. Appl. Geogr., 124, 102296.

[98] Westerlund, J., 2005. New simple tests for panel cointegration. Econom. Rev., 24(3), 297-316.

[99] Wu, R. W., Yang, D. G., Dong, J. F., Zhang, L, Xia, F. Q., 2018. Regional inequality in China based on NPP-VIIRS night-time light imagery. Remote Sens., 10(2), 240.

[100] Wu, S. X., Wang, P. P., Sun, B. D., 2022. Can the Internet narrow regional economic disparities?. Reg. Stud., 56(2), 324-337.

[101] Xie, Y, Zhou, X., 2014. Income inequality in today’s China. Proc. Natl. Acad. Sci. U.S.A., 111(19), 6928-6933.

[102] XINHUANET, 2020. China Unveils Guideline on Improving Market-Based Allocation of Production Factors.

[103] Zhang, Q. H., Zou, H. F., 2012. Regional inequality in contemporary China. Ann. Econ. Finance 13(1), 113-137.

[104] Zhang, W. J., Bao, S. M., 2015. Created unequal: China’s regional pay inequality and its relationship with mega-trend urbanization. Appl. Geogr., 61, 81-93.

[105] Zhang, X., 2019. Investigation of e-commerce in China in a geographical perspective. Grow. Change 50(3), 1062-1084.

[106] Zhang, X, Fan, S., 2004. Public investment and regional inequality in rural China. Agric. Econ., 30(2), 89-100.

[107] Zheng, R, Wu, G, Cheng, Y, Liu, H, Wang, Y, Wang, X., 2023. How does digitalization drive carbon emissions? The inverted U-shaped effect in China. Environ. Impact Assess. Rev., 102, 107203.

[108] Zheng, Y., 2021. The impact of digital financial inclusion on urban-rural income inequality in different regions of China. Front. Econ. Manag., 2(12), 426-432.

[109] Zhu, S, He, C, Zhou, Y., 2017. How to jump further and catch up? Path-breaking in an uneven industry space. J. Econ. Geogr., 17(3), 521-545.