Two Sides of a Coin: Digital Economy and the Supply of Basic Public Services

With the development of a new generation of IT, digital economy bears a far-reaching impact on governmental behavior and effect of governing. There are two main research purposes of this paper: First, it aims to study the relationship between the digital economy and the supply of basic public services. The second purpose is to clarify the transmission mechanism through which the digital economy affects the supply of basic public services. This paper gives an examination of the association of digital economy with the supply of basic public services based on the panel data collected from 287 prefecture-level cities across China from 2011 to 2021 and by utilizing bidirectional fixed effect model. The study delivers findings as follows: There is an inverted “U”-shaped relationship between digital economy and the supply of basic public services and most of the cities situate at the left-hand side of the inflection point. Market enabling and financial enabling serve as the transmission channel through which digital economy affects the supply of basic public services. In non-central cities and areas where energy consumption is high, development of digital economy and the supply of basic public services remain effective in promotion in the first place and inhibition afterwards. A further study shows that there is a non-linear relationship, namely, digital economy plays a role in promoting in the first place and inhibiting afterwards in basic public services such as employment services, social security, and health care. The study’s findings stated hereinafter serve as a reference as to precise formulation of basic public services in the digital and intelligent era, as well as facilitating with sustainable growth.