The impact of digital economy on capital misallocation: evidence from China

Capital misallocation is a serious threat to economic growth, and digital economy may have the potential to help curb capital misallocation. Based on the provincial panel data from 2006 to 2019, this study calculates digital economy and capital misallocation in 30 provinces of China. The classical econometric model and the spatial panel model are used to test the impact of digital economy on capital misallocation. The moderating effect model is constructed to analyze the moderating effect of innovation environment (financial development and talent agglomeration). The results show that digital economy significantly inhibits capital misallocation, this conclusion still holds after a series of robustness tests. In addition, there is a spatial spillover effect of digital economy on capital misallocation. Digital economy can inhibit not only local capital misallocation, but also neighboring capital misallocation. Financial development and talent agglomeration have a moderating effect in the relationship between digital economy and capital misallocation. Promoting financial development and talent agglomeration are conducive to enhancing the inhibitory effect of digital economy on capital misallocation.