Digital Economy Insights: Entropy Weight and DID Analysis

The swift rise of the digital economy has created a need for a holistic assessment framework. This paper analyzes a panel data set of 31 provinces of China from 2012 to 2022 and proposes a measurement framework for the digital economy based on an entropy weighting method. A spatio-temporal analysis using Moran's and Terrell's indices, in conjunction with a difference-in- differences (DID) model, analyzes the role of digitization policies in China in the context of economic growth. It is found that the digital economy sector is increasing its footprint, while there continue to be wide regional inequality in levels of development, while intensity of development is decreasing from east to west.Indications from the DID model imply that digital economy policies have improved macroeconomic growth, but returns appear to be decreasing every year. Additionally, the findings bolster the case for ongoing iterative policy design and policy development to ensure that the digital economy remains a significant enabler as an element of new quality of productivity, and eventually becomes a legitimate driver of relatively dynamic structural economic growth.