Does the Development of the Digital Economy Promote Common Prosperity?—Analysis Based on 284 Cities in China

Round 1

Reviewer 1 Report

The purpose of this paper is to quantify the level of development and the impact of the digital economy on the "common prosperity" of 284 Chinese cities. The authors find that the digital economy promotes common prosperity in a nonlinear way, which is amplified in low-level digital economy regions. In addition, the digital economy has externalities and a spatial spillover effect. The analysis is interesting and sound, but there are serious presentational issues.

 

The writings have the feel of a piece invited by a political party rather than a scholarly independent paper. The literature review, which includes only Chinese authors, is odd, mentioning things like "the laws of historical development." There is no such thing because history is random. Because the empirical findings do not rely on these "theoretical" foundations, I am willing to accept this paper if the literature review is rewritten. The tradeoff between efficiency and equity is not mentioned, and the concept of common prosperity appears to ignore this. Furthermore, there are typos all over the place. I've discovered a few. However, I recommend a thorough screening to eliminate them all.

 

Typos

Line 28, “However”

Line 40, extra space

Line 84, It should be Cheng Enfu et al. [3]; same problem on line 89, etc.

Line 91. Please, rewrite.

Line 93. The “second”…

 

The symbols and equations are “images.” Please make use of MathType or the built-in equation tool in Word.

Author Response

Dear Reviewers,

Thanks very much for taking your time to review this manuscript. I really appreciate all your comments and suggestions! I have uploaded  our revised manuscript.

First of all, I will briefly introduce the revision of the following article. According to the reviewers' comments, I rewrote the literature review and theoretical part of the article, and added some literature from various regions. At the same time, I reduced the weight of the similarity of the articles. Followed by a point-by-point response to the comments

 

Comments and Suggestions for Authors 1,

The writings have the feel of a piece invited by a political party rather than a scholarly independent paper. 

Response

Thank you for your suggestion, we have removed all the words about politics from the article.

 

Comments and Suggestions for Authors 2,

The literature review, which includes only Chinese authors, is odd,

Response

First of all, due to the negligence of our work, we ignored the issue of document sources, so we used a large number of documents from China. In this revision, we strive to add documents from scholars from other regions.

 

Comments and Suggestions for Authors 3,

mentioning things like "the laws of historical development." There is no such thing because history is random. Because the empirical findings do not rely on these "theoretical" foundations, I am willing to accept this paper if the literature review is rewritten.

Response

Yes, this problem is caused by cultural differences. Now, in order to make this article more international and academic, we have deleted the statement about "the laws of historical development" and rewritten the literature review.

 

Comments and Suggestions for Authors 4,

The tradeoff between efficiency and equity is not mentioned, and the concept of common prosperity appears to ignore this.

Response

Thank you very much for raising such a valuable question, so we made a detailed explanation of "common prosperity is the unity of fairness and efficiency" in the article. For details, see lines 79 to 84 of the article

 

Comments and Suggestions for Authors 5,

Furthermore, there are typos all over the place. I've discovered a few. However, I recommend a thorough screening to eliminate them all.

Response

After your reminder, we did find these typos and corrected them according to your suggestion.

 

Comments and Suggestions for Authors 6,

The symbols and equations are “images.” Please make use of MathType or the built-in equation tool in Word.

Response

Yes, I am now using the built-in equation tool in word to modify the symbols and equations of the article

 

We thank you again for your review, and we hope that the revised manuscript is accepted for publication in the Sustainability.

Sincerely,

Zhang Yuanbo

Author Response File: Author Response.docx

Reviewer 2 Report

First of all, I would like to thank you for the possibility of reviewing this interesting paper that I have read with great interest.

The paper may have a clear interest associated to researchers from different scientific disciplines and, therefore, could have a notable repercussion in specialized scientific literature.

Why is this study necessary? should make clear arguments to explain what the originality and value of the proposed model is. This should be stated in the final paragraphs of introduction and conclusion sections.

Similarity index is a little bit to high please review the next part:

Meanwhile, the achievements of the 38
new generation of technological revolutions, such as the Internet of Things, artificial in- 39
telligence， and blockchain, are increasingly integrated into all aspects of economic and 40
social development. The digital economy has become an important engine for building a 41
modern economic system with its high innovation, strong permeability, and wide cov- 42
erage.

From the macroscopic point of view, the imbalance between regional and ur- 44
ban-rural development has become an obstacle to achieving common prosperity. At the 45
micro level, the excessive income disparity among residents of different regions also af- 46
fects the realization of common prosperity. The digital economy takes into account both 47
equity and efficiency, overcome the limitations of traditional factors of production on 48
economic growth, and belongs to the new economic form under the fourth industrial 49
revolution. It can, to a certain extent, solve the problem of unbalanced and insufficient 50
development[1,2] and contribute to the realization of common prosperity. Exploring the 51
relationship between the digital economy and common prosperity not only helps to un- 52
derstand and grasp the development effect of the digital economy in the new era but al- 53
so provides a new path for the realization of common prosperity that conforms to the 54
requirements of the times, responds to the development of the times and has a certain 55
theoretical basis. Can the development of the digital economy promote common pros- 56
perity? What are the mechanisms for the digital economy to influence common prosper- 57
ity? It is the main question to be addressed in this paper. The purpose of this paper in- 58
cludes the following aspects: First, to quantify the development level of the digital 59
economy and common prosperity in 284 cities in China, and to discuss the impact and 60
mechanism of the digital economy on common prosperity. Second, to investigate the 61
spatial effects of the digital economy on common prosperity by applying spatial econo- 62
metric methods. Third, based on the relevant results, corresponding policy recommen- 63
dations are proposed to promote the development of the digital economy and achieve 64
common prosperity.

Literature overview well but please review the similarity index of the paper.

I would like to suggest the following references:

Fülöp, M. T., Topor, D. I., Ionescu, C. A., Căpușneanu, S., Breaz, T. O., & Stanescu, S. G. (2022). Fintech accounting and Industry 4.0: future-proofing or threats to the accounting profession?. Journal of Business Economics and Management, 23(5), 997-1015.

Akram, U et al. (2021). Impact of digitalization on customers’ well-being in the pandemic period: Challenges and opportunities for the retail industry. International Journal of Environmental Research and Public Health, 18(14), 7533.

 

Wang[7] evaluated the common prosperity in the 98
Yangtze River economic belt in four dimensions: material, social, spiritual life, and eco- 99
logical environment, and found that the overall level of common prosperity in the 100
Yangtze River economic belt increased significantly from 2010 to 2019, but the level of 101
common prosperity in the lower reaches was much higher than that in the middle and 102
upper reaches. Thirdly, it is about the analysis of specific practices to achieve common 103
prosperity. Cheng Mingwang[8] et al. analyzed the impact of economic growth on the 104
gap between urban and rural areas, and found that due to economic growth, a large 105
number of urban jobs have been provided, even if migrant workers are restricted to 106
low-skilled industries, they can promote common prosperity by narrowing the wage 107
gap and narrowing the gap between urban and rural areas. Xuetao Sun[9] et al. studied 108
the relationship between new urbanization and common prosperity and found that 109
there is a spatial correlation between new urbanization and common prosperity, point- 110
ing out that farmers' income and public services play a conduction role in the process of 111
new urbanization promoting common prosperity, and suggesting that the promotion of 112
new urbanization can narrow the urban-rural gap and thus achieve common prosperity.

3. Theoretical Analysis and Research Hypothesis 209
In addition to the direct impact of the digital economy on the common prosperity 210
due to its characteristics, it can also have an indirect impact on the common prosperity 211
through certain mechanisms of action. Considering "Metcalfe's law" of the Internet, the 212
law of increasing marginal effects may come into play in the network economy, and 213
there may be spatial spillover effects in the process of the digital economy affecting the 214
common prosperity. Therefore, this paper focuses on four aspects: direct impact, non- 215
linear effect, spatial spillover, and mechanism of action to demonstrate the impact of the 216
digital economy on common prosperity, and puts forward corresponding hypotheses. 217

3.1. Direct impact of the digital economy on common prosperity 218
As an economic structural change, the digital economy, due to its inherent versatil- 219
ity and zero marginal cost, can not only drive economic growth and create new growth 220
points for economic development but also balance development and guarantee equity 221
and sharing[31]. This allows the digital economy to effectively break the obstacles in the 222
process of achieving common prosperity, and to balance the contradiction between 223
"making a bigger cake" and "sharing a better cake". Since common prosperity has the 224
characteristics of "one body with two sides", that is, common prosperity is the unity of 225
efficiency and fairness. Therefore, the direct effect of the digital economy on promoting 226
common prosperity also needs to be analyzed from two aspects. From the perspective of 227
efficiency, the digital economy is supported by advanced intelligent technologies such as 228
cloud computing, artificial intelligence, and blockchain, and the organic integration of 229
these advanced technologies with other factors has promoted the innovation and devel- 230
opment of new industries, reshaped the production structure[32], and created new mar- 231
kets and employment opportunities[33] The development of the digital economy also 232
opens the way for economic activity, eliminates barriers to economic transactions, inter- 233
connects various economic agents, shortens production time, increases the speed of cap- 234
ital turnover, and thus improves the efficiency of business operations. Therefore, the 235
development of the digital economy contributes more to the improvement of efficiency 236
than the traditional economic forms. From the perspective of equity, the zero marginal 237
cost feature of the digital economy is conducive to solving the problem of unbalanced 238
development[34]. On the one hand, the digital economy can not only effectively com- 239
municate between urban and rural areas and break the geographical limitation between 240
regions, but also reduce the regional income gap and accelerate urban-rural integration 241
by lowering the search cost and eliminating the information gap, thus promoting com- 242
mon prosperity[35]. On the other hand, digital governance, as part of the digital economy, 243
guarantees the effective flow of data among individuals, markets, and governments, al- 244
lowing governments to formulate social security policies in a more targeted manner, 245
improve social security systems, and reduce income inequality. The following hypothe- 246
sis is therefore proposed.

 

Table 1

4.1.2. Core explanatory variables 319
The level of digital economy development is the core explanatory variable, denoted 320
as and the digital economy is portrayed using the indicator construction method. 321
Referring to Zhao Tao[43], Huang Yongchun[44], and Zhang Kexian[45] et to quantify the 322
digital economy development in two dimensions: the level of Internet development and 323
digital financial inclusion. The level of Internet development consists of the number of 324
Internet broadband access users per 100 people, the proportion of employed persons in 325
the computer service and software industry, the number of cell phone users per 100 326
people, and the total amount of telecommunication business per capita. Digital Financial 327
Inclusion adopts Peking University Digital Financial Inclusion Index[46].

 

4.1.4. Control variables 346
This article has been referenced by Yuan Hui-ai[29], Shi Yi-Ming [42], Xiang Yun[30] et 347
al. on the selection and ideas of control variables, the control variables used at the mu- 348
nicipal level include, the level of opening up to the outside world ( ): the ratio of the 349
actual amount of foreign capital used in the year to GDP; the level of financial develop- 350
ment ( ): the ratio of the loan balance of financial institutions to GDP; the level of in- 351
dustrialization ( ): the logarithm of the number of industrial enterprises above the scale 352
is used instead; human capital ( ): the logarithm of the number of students in higher 353
education is used as a measure; unemployment rate ( ): the ratio of the number of 354
unemployed people to the total population is chosen as the measure. 355
4.2. Data sources 356
This paper conducts empirical analysis based on panel data from 284 cities nation- 357
wide from 2011 to 2020. The data are obtained from the China City Statistical Yearbook, 358
EPS database, and the official websites of provincial and municipal statistical bureaus, 359
and a few missing data are filled by interpolation to ensure the accuracy and complete- 360
ness of the data. 361
4.3. Model Construction 362
4.3.1. Baseline regression model setting 363
To test the above set of hypotheses, this paper first constructs the following bench- 364
mark regression model. 365
(4) 366
Where , represent cities and years, is the level of common prosperity, and 367
represents the level of digital economy development, and denotes a series 368
of control variables, and denotes the random error term.

 

5. Empirical Analysis 401
5.1. Descriptive Statistics 402
The results in Table 2 show that the mean value of the common prosperity devel- 403
opment level of 284 prefecture-level cities is 0.1311, the maximum value is 0.4013, and 404
the minimum value is 0.0455, indicating that there is a huge gap in the development of 405
common prosperity at the municipal level in China, which is different from that of Xiang 406
Yun[30] et al. and Shi Yi-Ming[42] et al. found similarly. The results of the digital economy 407
also show the characteristic of "small mean value and large standard deviation". The 408
mean value of resource allocation efficiency is 2.1017, and the difference between the 409
maximum and minimum values is 8.3776, which also shows a large regional difference. 410
In terms of control variables, the level of openness to the outside world ( ), the level of 411
financial development ( ), the level of industrialization ( ), human capital ( ), 412
unemployment rate ( ) all have relatively large differences.

5.2.1. Baseline regression results 416
The Hausman test was used to determine whether a fixed or random effects model 417
was chosen, and the results showed that the test statistic was 46.99 with a p-value of 418
0.000, indicating that a fixed effects model should be used. The results of the baseline 419
regression are presented in Table 3. Column (1) indicates the direct effect of the digital 420
economy on common prosperity without adding control variables, with a significantly 421
positive coefficient, and the development of the digital economy is positively related to 422
common prosperity. Column (2) shows that the effect of the digital economy on common 423
prosperity is significant at a 1% significance level and there is a positive correlation be- 424
tween the two, indicating that the digital economy still has a positive effect on common 425
prosperity when considering different cities' level of openness to the outside world, level 426
of financial development, level of industrialization, and the coefficients of columns (1) 427
and (2) are above 60%. The results of the baseline regression verify hypothesis 1, 428
which states that the digital economy has a positive effect on common prosperity.

5.2.3. Analysis of the spatial spillover effect of the digital economy on common prosper- 461
ity 462
To verify whether there is a spatial correlation in the development of common 463
prosperity in each region, the Moran's I index is used here to test, and the results of the 464
Moran's I test range from -1 to 1. Results less than 0 indicate negative spatial correlation, 465
greater than 0 indicate positive spatial correlation, and equal to 0 indicate no spatial cor- 466
relation. Here, three weight matrices were used to conduct Moran's I test separately, and 467
the results are shown in Table 5. Whether it is the adjacency matrix, geographic inverse 468
distance matrix, or economic-geographic nested matrix, Moran's I of common prosperity 469
is greater than 0 and significant, which indicates that there is a significant positive spa- 470
tial correlation in the development process of common prosperity in different regions, 471
and spatial econometric analysis can be used. The appropriate spatial econometric mod- 472
el is selected through correlation tests. Firstly, the Hausman test is used to judge the se- 473
lection of fixed or random effects; then the LM test is used to judge whether there is a 474
spatial error or spatial lag in the model; finally, the LR test is used to judge whether the 475
model can be simplified to SAR or SEM model. Combining the test results of the three 476
matrices, it was determined that the fixed-effect SDM model was selected as the spatial 477
econometric regression model.

5.3. Analysis of the mechanism of action 513
The results of testing the mechanism of action of the digital economy for promoting 514
common prosperity are shown in Table 7. The results in column (9) show that the digital 515
economy reduces the degree of factor price distortion, i.e., the digital economy improves 516
the efficiency of resource allocation. Combining the results of columns (2), (9), and (10), 517
it can be concluded that the digital economy promotes common prosperity by improv- 518
ing the efficiency of resource allocation. The development of the digital economy breaks 519
the information asymmetry, makes the market more open and transparent, improves the 520
efficiency of resource allocation, reduces the imbalance of regional development, and 521
promotes common prosperity. Meanwhile, to verify the reliability of the model, this pa- 522
per uses the "self-help method" Bootstrap to repeat the sampling 1000 times, and the 523
model calculation results are shown in Table 8 at a 95% confidence level. The results of 524
the Bootstrap test are consistent with the results of a regression model. Hypothesis 4 is 525
verified. 526
Since the digital economy has spatial spillover effects, to further investigate the 527
mechanism of the digital economy on common prosperity, the mediating variable re- 528
source allocation efficiency is included in the spatial Durbin model for analysis, and the 529
results are presented in Table 9. Table 9 reports the mechanism of the digital economy 530
on common prosperity under three different matrices, respectively. In the inverse dis- 531
tance matrix, the resource allocation efficiency ( ) and its lagged term ( ) coeffi- 532
cients are not significant. Overall, the regression results remain consistent with the panel 533
fixed effects regression results in Table 7 above, where the digital economy can enhance 534
the allocation efficiency of resources and promote common prosperity by influencing 535
resource allocation efficiency.

5.3.4. Endogeneity issues 572
To test whether the digital economy and common prosperity are mutually causal 573
and whether there is an endogenous problem. The instrumental variables approach is 574
used here for treatment. The instrumental variables chosen concerning Huang 575
Qunhui[53]et al. and Zhao Tao[43] et al. used the number of post offices per 10,000 people 576
in 1984 as the instrumental variable in this paper. However, since this instrumental var- 577
iable is cross-sectional data and cannot be used directly, refer to the method of Nunn[54] 578
et al., introduce the number of Internet users in the previous year, and make it form an 579
interaction item with the number of post offices per 10,000 people in 1984. This interac- 580
tion item is a new instrumental variable. The results are shown in Table 10, column (10). 581
The regression results show that after considering endogenous issues, the conclusion 582
that the digital economy promotes common prosperity still holds. 583
In the test of under-identification of instrumental variables, the Kleibergen-Paap rk 584
LM statistic was 46.980 with a p-value of 0.000, rejecting the original hypothesis. In the 585
test of weak identification of the instrument, the Kleibergen-Paap rk Wald F statistic is 586
19.622, while the critical value of Stock-Yogo weak identification test at 10% level is 587
16.38, which is higher than the critical value, indicating that the cross term selected in 588
this paper as an instrumental variable for digital economy development is more reason- 589
able.

 

Overall, I believe that the ideas are well expressed, and the storyline is easily followed by the reader. However, in the course of reading the manuscript, I could identify some minor mistakes that should be dealt with more carefully by the authors.

In short, in my opinion, this is a potentially publishable paper that could make a significant contribution to the specialized literature. However, the authors should make an additional effort to solve the problems previously mentioned.

However, I hope that all these comments will serve the author to improve the quality of the paper. Finally, I hope that the comments will be understood positively by the authors of this interesting paper.

Good luck!

Comments for author File: Comments.pdf

Author Response

Dear Reviewers,

Thanks very much for taking your time to review this manuscript. I really appreciate all your comments and suggestions! I have uploaded our revised manuscript.

 

First of all, I will briefly introduce the revision of the following article. According to the reviewers' comments, I rewrote the literature review and theoretical part of the article, and added some literature from various regions. At the same time, I reduced the weight of the similarity of the articles. Followed by a point-by-point response to the comments

 

Comments and Suggestions for Authors 1,

Why is this study necessary? should make clear arguments to explain what the originality and value of the proposed model is. This should be stated in the final paragraphs of introduction and conclusion sections.

Response

Thank you for your valuable comments. According to the comments, we have modified the article accordingly, adding the significance and purpose of the article research in the introduction, and adding the summary and shortcomings of the article in the end. For details, see lines 44 to 53 and lines 501 to 506 of the article.

 

Comments and Suggestions for Authors 2,

Similarity index is a little bit to high please review the next part:

Response

We have reduced the weight of the repetition rate of the article.

 

Comments and Suggestions for Authors 3,

I would like to suggest the following references:

Fülöp, M. T., Topor, D. I., Ionescu, C. A., Căpușneanu, S., Breaz, T. O., & Stanescu, S. G. (2022). Fintech accounting and Industry 4.0: future-proofing or threats to the accounting profession?. Journal of Business Economics and Management, 23(5), 997-1015.

Akram, U et al. (2021). Impact of digitalization on customers’ well-being in the pandemic period: Challenges and opportunities for the retail industry. International Journal of Environmental Research and Public Health, 18(14), 7533.

Response

Following your suggestion, we have added these two documents, specifically see lines 520 to 522 and 525 to 527.

 

We thank you again for your review, and we hope that the revised manuscript is accepted for publication in the Sustainability.

Sincerely,

Zhang Yuanbo

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

I'm happy to suggest approval.

 

Reviewer 2 Report

Good luck!