1. Introduction
A digital economy, based on digital technologies, the Internet, and the use of data, encompasses commerce in goods and services facilitated by digital platforms and networks. The development of digital economies can be traced back to the 1990s, when governments across the world began to promote access to digital commerce to secure future prosperity for their populations [
1]. In China, the digital economy began in the early 2000s and grew rapidly in the following years. Significant milestones in this development included the introductions of the first 3G network in 2006, the “Internet Plus” strategy in 2013, the “Made in China 2025” plan in 2015, and Digital Currency Electronic Payment (DCEP) in 2020. China’s digital economy has been on an upward trend since 2000. During the era of Xi Jinping, China pursued a new approach to global economic governance through digital transformation [
2]. The digital economy is crucial for national economic development, including GDP growth, high levels of employment, and changes in industrial structure [
3]. The integration of digital technology and data components has also enhanced the efficiency of businesses [
4,
5]. Furthermore, the digital economy has accelerated information dissemination, increased the speed of innovation, and broadened the scope of innovation [
6,
7]. It has also brought profound changes in the labor market, with significant changes in skill structures [
8,
9,
10]. China has acknowledged the significance of the digital economy and has undergone a distinct phase characterized by medium-to-high growth and a focus on innovation and global competitiveness. In short, digitalization is now an essential economic model that will affect the sustainable development of China—and all other countries—in the years ahead [
11,
12,
13].
Total factor productivity (TFP) is a reference standard used in economics to measure economic efficiency. It is primarily used to denote the proportion of economic activity that cannot be explained by amounts of input (e.g., capital and labor). Green total factor productivity (GTFP) incorporates both conventional total factor productivity and environmental variables. GTFP is a productivity measurement methodology that encompasses input variables such as capital, energy, labor, and economic benefits as desired output, and environmental damage as undesirable output [
14]. GTFP thoroughly takes into account the input restrictions of conventional TFP, as well as resource and environmental constraints. As a result, GTFP can more accurately depict the durability of economic growth [
15,
16,
17]. According to publicly available data from the International Energy Agency (IEA), in 2015, China’s primary-energy intensity exceeded that of Japan by 81% and that of the United States by more than 25%. This indicates that China has a significant issue with energy waste. Indeed, high levels of energy waste and environmental pollution have hindered the growth of China’s green economy [
18,
19,
20]. GTFP is a complete efficiency metric that takes into account environmental pollution, energy consumption, and economic growth [
21]. The digital economy effectively improves resource utilization, resulting in an upgraded industrial structure and a better optimized economic structure through digital information and knowledge. It is considered a vital development engine of GTFP [
22,
23,
24]. To sustain economic growth while prioritizing environmental performance and energy conservation, and, at the same time, inspire other countries to achieve sustainable development, comprehensive research on the relationship between the digital economy and GTFP should be conducted to help China take a greener development path. Previous studies have considered various aspects of this topic. According to Canh and Thanh [
25], the qualitative research literature supports the idea that the digital economy is multifunctional. Qualitative research has highlighted the transdisciplinary nature of the digital economy which results from the pragmatic utilization of information and communications technology (ICT). Technology production models and organizational governance structures, which have been impacted by governance modifications and technology advancements since the Industrial Revolution, are closely interconnected with the advancement of the digital economy [
26], which also offers new areas for modern technology.
The concept of the digital economy represents a historical stage in economic development. It has emerged from the evolution of the information and Internet economies. In 1996, Tapscot first introduced the concept of the digital economy, defining it as an economic system characterized by the continuous application of computer information technology. The digital economy can be understood in both broad and narrow terms. Broadly speaking, it refers to economic activities that utilize knowledge and digital information as production factors, employing information technology and networks to optimize macroeconomic structures and enhance economic efficiency. Narrowly defined, the digital economy involves activities extracted from traditional economic operations, such as the production, consumption, and distribution of goods or digital services.
China’s understanding of the digital economy has continued to deepen. In 2016, the “G20 Digital Economy Development Cooperation Initiative” emphasized that the digital economy, based on digital information and knowledge, utilizes modern information technology and networks to promote the optimization of economic structures and improve economic efficiency. The “China Digital Economy Development White Paper (2021)” released by the China Academy of Information and Communications Technology proposed that there are several aspects to the digital economy, including industrial digitization, digital industrialization, digital value creation, and digital governance. Among these, digital industrialization may be seen as the foundation of the digital economy; it includes perception, represented by intelligent communication devices; connection, represented by wireless networks; integration, represented by the Internet of things and artificial intelligence; as well as digital applications. Industrial digitization refers to the innovative integration of new technologies with traditional industries; this may be evidenced in new forms of business models.
As Internet technology advances, the strain on old business models continues to increase. Recent research has indicated that the digital economy allows SMEs to shift from traditional operating activities to digitalization through its impact on innovation performance [
27,
28,
29]. The regulatory system, empowerment management, and the industrial restructuring of the digital economy have also garnered the interest of researchers in recent years [
30]. Studies on the effects of the digital economy of the labor market may also be found in the literature, especially changes in skill structures [
9,
10,
31]. The digital economy fosters innovation in the collection and analysis of economic research data and methodologies [
32,
33]. The strategic management literature is mostly concerned with the influence of the digital economy on management operations. The digital economy has brought new pressures and new challenges to established firms by decreasing the expenses associated with transmitting and duplicating information [
34,
35].
However, there are several areas of research in which further studies may be of value. First and foremost, in quantitative research, it is imperative to establish a scientific index system that can precisely gauge the present condition of digital economy advancement. Secondly, it is imperative to prioritize the examination of the correlation between GTFP and the digital economy, as this has the potential to significantly stimulate innovation for GTFP. Thirdly, although a number of scholars have employed Solow’s framework to examine GTFP, utilizing the perpetual inventory method to mimic capital stock, this method involves inherent limitations.
In the study described in this paper, we sought to make the following contributions: First, we conducted a multidisciplinary comprehensive study of the digital economy, including infrastructure, industrial scale, and local finance, instead of just focusing on the Internet industry. Second, we employed principal component analysis as an unbiased weighting technique to create scientific indicators for assessing the progress of the digital economy. Third, we used the dual-method production function to accurately calculate GTFP [
36], thus avoiding the limitations of capital stock estimation.
In this study, we employed a linear model to investigate the influence of the digital economy on green total factor production. The model was also used to assess the variability of this influence. By measuring the green total factor productivity of 282 cities over the 2011–2019 period, we obtained a substantial body of new research evidence which is relevant at the city level. The findings reported here provide a factual basis for assessing the current situation of high-quality economic development in China at the urban level.
5. Conclusions and Implications
In the study reported here, we carried out empirical analyses using panel data from Chinese cities for the years 2011 to 2019 to examine the mechanisms by which the digital economy influences green total factor productivity. Our conclusions may now be stated as follows: (1) The digital economy has the potential to greatly improve the overall efficiency of green production. (2) The digital economy primarily affects green total factor productivity by means of green innovation. Green innovation has a major impact on green total factor productivity in the digital economy. Green total factor productivity may be significantly increased by the use of digital technology, which can also effectively increase production efficiency, lower production input costs, and improve product quality. Green total factor productivity is further improved by the digital economy, which also fosters technical innovation, lowers energy use, and decreases pollutant emissions. (3) In terms of heterogeneity, cities in the Yangtze River Delta and the eastern part of China have achieved notable green economic growth by developing the digital economy, so that there is now a “digital divide” between different regions of China.
In light of these findings, we propose the following recommendations: (1) Recognizing that the digital economy primarily involves the digitization of industries and the adoption of digital technology, the government should enhance its investment in digital infrastructure. It should also actively encourage the deep integration of traditional industries with digital technology, facilitate the transformation and modernization of traditional industries, reduce reliance on energy and the environment, and stimulate the emergence of a new business sector and economy. These measures will enable the simultaneous development of the supply side and demand side. (2) The government should acknowledge and appreciate the significant impact that factor allocation has on the digital economy, eliminate any barriers that impede the movement of money and human resources, and enhance the effectiveness of factor allocation as a new channel of factor flow—the digital platform. (3) The government ought to furnish law-enforcement services to safeguard the advancement of the digital economy and effectively manage the overall circumstances. When promoting the national digital economy plan, it is important to establish precise objectives for the growth of the local digital economy and effectively utilize digital economy policy advice. (4) The government ought to devise a distinct digital economy development strategy. For instance, it is advisable to enforce stronger digital economy policies in underdeveloped cities to facilitate the spread and exchange of digital economy resources and foster collaborative growth across different regions.