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Digital trade, trade openness, FDI, and green total factor productivity

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  • Dai, Siwei
  • Tang, Daoyun
  • Li, Yunfeng
  • Lu, Huaixin

Abstract

The rapid digitalization of global trade has introduced a transformative element to urban sustainability, but its specific impact on green total factor productivity (GTFP) remains understudied, particularly in the context of China's urban development. Although studies have explored digital trade's economic benefits, the interplay between digital trade, trade openness, and foreign direct investment (FDI) in shaping urban GTFP has not been thoroughly investigated. This study fills that gap by investigating the relation between digital trade and GTFP in China, utilizing a comprehensive provincial panel dataset from 2005 to 2021. Employing a fixed-effects model with various control variables, we find that digital trade significantly increases GTFP. The findings also reveal that both trade openness and FDI positively moderate this relation, amplifying digital trade's impact on urban green transformation. The heterogeneity analysis across Chinese regions provides nuanced insights, demonstrating that the effect is most pronounced in the developed eastern region, followed by the middle region, and has a less significant impact in the western region. These findings contribute to the growing discourse on digital trade and sustainable urban development, with important implications for policymakers seeking to use digital technologies to promote environmental sustainability and economic growth. Our findings highlight the importance of fostering digital trade, increasing trade openness, and attracting green FDI as effective strategies to drive urban green transformation and improve GTFP, while emphasizing the need to address regional disparities and potential challenges associated with digital trade implementation.

Suggested Citation

  • Dai, Siwei & Tang, Daoyun & Li, Yunfeng & Lu, Huaixin, 2025. "Digital trade, trade openness, FDI, and green total factor productivity," International Review of Financial Analysis, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007099
    DOI: 10.1016/j.irfa.2024.103777
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    More about this item

    Keywords

    Digital trade; Green total factor productivity; Trade openness; Foreign direct investment; Urban sustainability;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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