Digital governance and urban total factor productivity: evidence from China’s pilot policy

Purpose This study aims to examine how digital governance, as a key driver of government modernization, enhances urban total factor productivity (TFP) through the exogenous shock of China’s 2014 “National Pilot Policy for Information Benefiting the People.” Design/methodology/approach Using a difference-in-differences (DID) approach, this study quantifies the policy’s impact on TFP and further analyzes mechanisms (employment structure, entrepreneurship, innovation) and heterogeneity (region, city type). Findings Digital governance significantly boosts TFP, primarily via optimizing labor allocation, stimulating entrepreneurship and fostering firm innovation. Effects are stronger in central/western regions, resource-based cities and provincial capitals. Research limitations/implications Sample is limited to Chinese prefectural cities; generalizability and long-term effects require further study. Practical implications The findings support targeted digital governance policies to maximize economic quality improvements, especially in less-developed areas. Originality/value To the best of the authors’ knowledge, this study is the first to quantify the causal impact of digital governance on TFP using a quasi-natural experiment (China’s 2014 policy pilot), addressing endogeneity concerns in prior correlational studies.