The Impact of Digital Economy and Industrial Agglomeration on Green Total Factor Productivity: An Analysis of Mechanisms and Regulatory Conditions

This paper examines the relationship between digital economy development, manufacturing agglomeration, and urban green total factor productivity (GTFP). Using an unbalanced panel of 283 Chinese prefecture-level cities over 2007–2022, we estimate a two-way fixed-effects model that includes digital development, manufacturing agglomeration, and their interaction. The interaction coefficient is positive and statistically significant, indicating that the association between manufacturing agglomeration and GTFP becomes more favorable as digital development increases. Sequential regressions link this relationship to lower capital misallocation, better labor allocation, and greater green patent activity, with stronger statistical support for the green-innovation channel. The lagged specification and environmental-performance outcome provide further supporting evidence. Subsample estimates provide suggestive evidence of a larger interaction coefficient in cities with higher environmental-regulation intensity. These findings connect digital development and manufacturing concentration with urban green productivity and highlight the relevance of factor allocation, green innovation, and regulatory conditions to the green transformation of industrial clusters.