How Does the Digital Economy Affect the Transition from Old to New Economic Drivers? Evidence from Chinese Cities

Accelerating the transition from old to new economic drivers (TONED) is fundamental to building a modernized economic system, and the digital economy (DE) has the potential to expedite this process. This study uses panel data that encompassed 273 prefecture-level cities in China from 2011 to 2020, to empirically examine the effect and underlying mechanisms of the DE on the TONED. The findings indicate that both the DE and TONED exhibit a distinct spatial differentiation, characterized by significantly higher development in the eastern regions compared to the western regions. Furthermore, the robustness test conducted to address the endogeneity problem verifies that DE has a significant positive driving effect on the TONED. In addition, industrial structure upgrading is a significant channel for DE to influence the TONED. Under the constraint of the level of economic development, DE exhibits a non-linear impact on the TONED, and the marginal effect is incremental after passing a specific threshold. Moreover, in the eastern region, non-resource cities, and urban agglomeration areas, DE has a more significant favorable effect on the TONED. The findings provide robust empirical evidence supporting the role of the DE in facilitating the TONED and offer valuable policy insights for developing countries aiming to advance economic transformation.