On January 27, Liu Taoxiong, professor at the School of Social Sciences, Tsinghua University and executive dean of the Institute for Innovation and Development at Tsinghua University, gave the Lecture 7 of Frontiers of Digital Economy Lecture Series on whether the digital economy has expanded or narrowed the regional economic gap. This lecture was hosted by Li Hongjun, associate professor at the Institute of Economics, School of Social Sciences, Tsinghua University.
Prof. Li first introduced Prof. Liu’s research interests and academic achievements. He said that the first six lectures have initially touched on the technological progress and economic growth brought by the digital economy. Today, as far as common prosperity is concerned, Prof. Liu will illustrate how the digital economy affects wealth distribution and economic growth.
Prof. Liu mentioned that this lecture is a slight extension of the established theme, and that it explores whether the digital economy will widen or narrow the economic gap beyond the regional level. The digital economy is a product of technological progress, which has been considered as an important factor affecting income gap. Therefore, it is particularly important to explore common prosperity in the era of digital economy. He summarized the research on the digital divide, which is divided into three levels: inequality of opportunity, inequality of digital skills, and inequality of outcomes, and is reflected in multiple dimensions such as country, region, class, age, and gender.
Prof. Liu pointed out that people are more concerned about the internal relations between the digital economy and the economic gap. Numerous studies have proven that economic gap is the root cause of the digital divide, but people are more concerned about the impact of the digital economy on economic gap. The digital economy has the characteristics of low search cost, replicability, low transportation and communication cost, recordability and verifiability. There are two main mechanisms affecting economic gap: The digital economy is the biased technological progress; it will create market power and rent. The impact of mechanisms on economic gap is reflected at multiple levels such as individuals, enterprises, and countries. The mechanism of biased technological progress can widen or narrow income gap, and the mechanism of rent is mainly to widen income gap. Has the development of the digital economy widened or narrowed income gap? He believed that continued research is needed on this question, as there is no single answer yet. Moreover, it is important to distinguish two cases when analyzing the economic gap caused by the digital economy: First, the digital divide is more likely to have widened the economic gap; second, under the same digital economy conditions, it is not possible to draw clear conclusions simply by looking at the impact of the development of the digital economy on the economic gap. Finally, Prof. Liu presented his team’s empirical research results to study the digital economy and China’s regional economy gap. He adopted dynamic factor analysis to construct digital economy development indicators for provinces, conducted the classic conditional convergence, and found that China’s economy shows convergence and the digital economy promotes economic growth and economic convergence. Through policy experiments, assuming that the level of digital economy development in backward regions has increased to a level similar to that in developed regions, it was found that backward regions will more than double the speed of catching up with developed regions. Therefore, great attention should be paid to the development of digital economy in backward regions.
This Lecture Series is supported by Sina Finance, NetEase Finance, Chinese Headlines, Xueshuo and KeAi’s Journal of Digital Economy.
