Technology growth in the digital age: Evidence from China

ABSTRACT

Based on a broad definition of the digital economy, this study constructs a digital technology capital measure-ment framework and measures China's digital technology capital services from 2002 to 2018 to illustrate the growth of digital technology. In addition, the relationship between digital technology and economic growth is examined using the growth accounting method and econometric panel models from the perspective of the substitution and penetration effects of information and communication technologies. The measurement results show that China's digital technology capital services grew faster than non-digital ones from 2002 to 2018. In terms of the substitution effect, the contribution of traditional capital to economic growth is diminishing, whereas digital technology capital's contribution is expanding. Regarding the penetration effect, the contribution of digital technology capital to labor productivity is gradually overtaking that of traditional capital, with the impact varying by sector. These results may provide developing countries with a strategy to seek new devel-opment drivers and sustain economic growth in the post-pandemic era.