Back Matter

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Technical Appendix: Impact of Digitalization on Productivity and Employment

This section quantifies the impact of the digitalization on productivity and employment using regression analysis, including both at the national level and panel regression at the provincial level.

Least square regression at national level:

Data: annual data on digital economy from China Academy of telecommunication Research,

interpolated into quarterly data (DEI). GDP, investment (INV), and employment (EMP) are quarterly data from National bureau of statistics. All variables are expressed in growth terms.

Regression: GDPt = α0 + α1 × DEIt-l + α2 INVt + α3 EMPt + εt

EMPt = α0 + α1 × DEIt-l + α2 GDPt + εt

Results:

Impact on growth

article image
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

Impact on employment

article image
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1

Panel regression at provincial level

Data: annual data on digital economy index from TenCent, interpolated into quarterly data (DEI). Provincial GDP, investment (INV), are quarterly data from National bureau of statistics. All variables are expressed in log terms, except GDP/Capita in level term.

Regression: GDPi,t = α0 + α1 × DEIi,t + α3 × GDP / Capitai,t-l + α2INVt + ηi + χt εi,t

Results:

article image
Robust standard errors in parentheses*** p<0.01, ** p<0.05, * p<0.1
1

We thank Linde Jing for research assistance, and China Academy of Information and Communication Technology and Tencent for data provision. We are also grateful to comments by Chang Yong Rhee, Markus Rodlauer, James Daniel, Sonali Chandra, and Tao Sun.

2

G20 Digital Economy Development and Cooperation Initiative.

3

Tencent is a Chinese digital company and Caixin is a leading Chinese media outlet.

4

Note the numbers presented here are averaged across all Chinese provinces, including e.g. rural China, while in more advanced parts of the economy, the indices suggest much higher level of digitalization.

5

This methodology calculates the digital capital stock and non-digital stock separately in the economy, and adds the contribution of digital capital stock to the size of digital economy.

6

Though in value-added terms, the share is much smaller at 11 percent. ICT exports account for 16 percent of China’s goods exports, and 40 percent of service exports.

7

World Development Indicator.

8

For example, the connecting speed of fixed broadband is 39 mbps, downloading speed 12 mbps, higher than in advanced economies like France. The penetration of broadband in households has exceeded 50 percent-- still lower than OECD, though the share of fiber users has reached 77 percent, the number one in the world. By 2016. There were 770 million 4G users in China, accounting for 58 percent of total mobile users, a higher penetration rate than in OECD (CAICT).

9

Reflecting the uncertainty of digital economy measurement, the estimated growth impact is subject to uncertainty. The net impact could also be smaller as resources are directed away from some traditional sectors amid digital disruption.

China’s Digital Economy: Opportunities and Risks
Author: Ms. Longmei Zhang and Ms. Sally Chen