Dr. Peiwen Bai, Professor

School of Economics, Xiamen University, Xiamen, China

Biography

Dr. Peiwen Bai currently works as a professor and doctoral supervisor at the School of Economics of Xiamen University, deputy director of the Economic Research Institute, deputy editor of "China Economic Issues", visiting scholar at Monash University, chief expert of major projects of the National Social Science Fund, and vice president of the Fujian Economic Association. He received a doctorate in management from Shanghai Jiao Tong University in 2006. His research areas are the digital economy and income distribution. He has published over 80 papers as first author in domestic and foreign journals. He has participated in and chaired research on multiple projects, including the National Social Science Fund Major Project and the Ministry of Education Major Project.

Topic

Digital Economy Development and Markup of Firm

Abstract

The integration of the digital economy with the real economy is a major issue for sustainable economic development in the new era. A large amount of economics literature focuses on the benefits of digital economy, such as increased productivity, increased innovation and improved organizational structure of firms. However, little literature has explored the costs of digital economy development to firms, such as increased competition and rising cost pressures. In this paper, we use the markup of firms as a combined reflection of the net value of these two effects, and theoretically construct a variable markup model to explore the mechanism. Further, this paper uses data on Chinese industrial firms from 2004-2013, combined with the newly developed imperfect instrumental variables method. It is found that digital economy development significantly reduces markup of firms, with a robust upper bound of -0.31%. The analysis of the mechanism reveals that the increase in competition among firms and the imperfect transfer of cost pressures by firms are important channels. The heterogeneity analysis shows that the negative impact of digital economy development on markup is larger for firms with characteristics such as less digitalization, tighter financing constraints, and weaker cost-saving capabilities. The study also finds that digital economy development reduces the dispersion of markup and significantly improves the efficiency of resource allocation. The findings of this paper have important implications for understanding the significance of digital economy and real economy integration, and how to further promote digital economy development effectively.