Regulation-induced digitalization

Yunqi Zhang and Xiaoyu Zhang

China Economic Review, 2024, vol. 88, issue C

Abstract: This paper investigates how environmental regulation induces firm digitalization. We construct a digital index based on textual analyses and find that after the implementation of the program, pilot firms' digitalization increased relative to that of a group of carefully matched control firms, which is opposite to the findings in the extant literature on technology adoption. This increase cannot be fully explained by regional unobservables, firms' own innovation, firm selection, or other policies. The results are robust when we consider firm subsidiaries. The increase in digitalization is not due to regulatory arbitrage, and the industry-level concentration of digitalization changes little.

Keywords: Environmental regulation; Technology adoption; Digitalization; Carbon emissions trading; Climate change (search for similar items in EconPapers)
JEL-codes: O13 O33 Q52 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:88:y:2024:i:c:s1043951x24001512

DOI: 10.1016/j.chieco.2024.102262

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