Does the digital economy catalyze the emergence of urban shrinkage? - Empirical evidence from Chinese prefecture-level cities

Globalization has led to the polarization of world cities and the increasing prevalence of urban shrinkage, posing a worldwide socio-economic development challenge. As an economic form brought about by information science and informatization, whether the digital economy (DE) impacts urban shrinkage and its internal transmission mechanisms are scientific questions worthy of further investigation. Therefore, this study empirically analyzes 287 prefecture-level cities in China from 2011 to 2021 using fixed effect and mediation models. The results show an upward trend in the development level of DE, with a spatial pattern of "high in the east and low in the west"; urban shrinkage exhibits a high-low-high trend from south to north. Additionally, DE significantly accelerates urban shrinkage by catalyzing the loss of population, technology, and capital factors. Finally, there are notable regional heterogeneity and type difference in the impact of DE on urban shrinkage, with a more pronounced effect in non-Northeast regions and central cities. The study highlights that DE enhances resource allocation efficiency, but it exacerbates regional development imbalances, affecting social equity, justice, and residents' well-being. Therefore, it is crucial to utilize the government's "visible hand" to macro-regulate "market failures" and ensure the implementation of people-oriented equalization of basic public services.