Digital economy and urban green transformation

Bei Wu, Wenxia Ma and Qi Zhao

International Review of Financial Analysis, 2025, vol. 104, issue PA

Abstract: This study examines the impact of the digital economy on green transformation, drawing on provincial-level panel data from China spanning 2012–2023. Using advanced econometric techniques, including threshold regression, spatial Durbin models, and mediating effect analyses, the research provides robust evidence of the digital economy's role in reducing carbon intensity. Results reveal significant direct effects, where digitalization enhances energy efficiency and optimizes production processes. Additionally, indirect effects emerge through the development of information and technology and industrial restructuring, further amplifying environmental benefits. A nonlinear relationship is observed, with the most substantial environmental advantages occurring at moderate levels of digitalization, followed by diminishing returns at higher levels. Moreover, notable spatial spillover effects are observed, demonstrating that advancements in one region's digital economy positively influence green transformation in neighboring areas. These findings reflect the digital economy's crucial role in advancing sustainability goals and offer actionable insights for policymakers. To maximize environmental benefits, regions with lower levels of digitalization should prioritize investments in digital infrastructure and technology adoption, whereas more advanced regions should focus on enhancing energy efficiency and integrating green technologies. The study also highlights the importance of inter-regional collaboration in leveraging spatial spillover effects to drive collective progress toward green transformation. By integrating direct, mediating, nonlinear, and spatial dimensions into a unified analytical framework, this research advances theoretical understanding and provides practical recommendations for harnessing digitalization as a tool for sustainable development.

Keywords: Digital economy; Green transformation; Carbon intensity; Spatial spillover effect; Nonlinear relationship (search for similar items in EconPapers)
JEL-codes: C23 O33 Q56 R11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:104:y:2025:i:pa:s1057521925003734

DOI: 10.1016/j.irfa.2025.104286

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