How does coordinated regional digital economy development improve air quality? New evidence from the spatial simultaneous equation analysis

Countries around the world are increasingly turning towards developing digital economies to find better strategies for tackling the environmental pollution associated with economic growth while also pursuing high-quality economic conditions. This study aims to probe the link between coordinated regional digital economy development (RDEC) and air quality. A province-level RDEC indicator based on city-level data is developed, and air pollution is gauged by annual average PM_2.5 concentrations. Furthermore, a spatial simultaneous equation model is employed to examine the causality further. The empirical results indicate that a bilateral causal relationship exists: RDEC improves air quality, and better air quality also facilitates RDEC. This relationship is influenced by spatial spillover effects. Specifically, air quality and RDEC of an area have a negative influence on the RDEC of neighboring regions, while they have a positive impact on neighboring areas' air quality. Further analysis suggests that green total factor productivity, advanced industrial structure, and regional entrepreneurship level can indirectly affect the contribution of RDEC to air quality. Additionally, the impact of air quality on RDEC may be realized through the increase in labor productivity, lower external environmental costs of regional economic development, and enhanced regional foreign economic exchange.