Does e-commerce infrastructure increase enterprise productivity? Evidence from China's e-commerce demonstration city

Abstract

This study leverages the National E-commerce Demonstration City Pilot (NEDC) as a quasi-natural experiment in e-commerce infrastructure development. Utilising panel data from non-financial firms listed on China's A-share market from 2005 to 2022, we pioneered employ a multi-period difference-in-differences (DID) approach to explore the direct and indirect effects of e-commerce infrastructure on total factor productivity (TFP). Our findings reveal that: (1) The NEDC initiative significantly enhances firm-level TFP. This result remains robust after addressing endogeneity issues through IV-2SLS and propensity score matching and difference in differences methods and undergoing a series of robustness tests. (2) Channels tests indicate that the NEDC policy indirectly boosts firm TFP primarily by fostering technological innovation and augmenting human capital. (3) Heterogeneity analysis demonstrates that the NEDC policy effectively stimulates TFP growth in state-owned enterprises, firms with high equity concentration, manufacturing and low-tech industry firms. The policy's impact is more pronounced in cities with high administrative levels, in the eastern and central cities, and in cities with superior traditional infrastructure. The empirical evidence provided by this study not only supports the role of e-commerce infrastructure in driving economic growth but also offers valuable insights for bridging the income disparity between developing and developed nations, and mitigating income inequality.