1 s2.0 S0313592622001394 Main

Economic Analysis and Policy 76 (2022) 502–521
Contents lists available at ScienceDirect
Economic Analysis and Policy

journal homepage: www.elsevier.com/locate/eap
Modelling economic policy issues
Can digital finance narrow the regional disparities in the

quality of economic growth? Evidence from China
∗
Chengchao Lv a , Jie Song a , Chien-Chiang Lee b ,
a
School of Economics and Management, Qingdao University of Science and Technology, Qingdao, Shandong, China
b
School of Economics and Management, Nanchang University, Nanchang, China
article info a b s t r a c t
Article history: This research applies the Data Envelopment Analysis-Slack Based Measure (DEA-SBM)
Received 3 July 2022 model and Global Malmquist–Luenberger (GML) index to estimate the quality of eco-
Received in revised form 28 August 2022 nomic growth (QEG) in 30 provinces of China during the period 2011–2019. The results
Accepted 28 August 2022
are that both digital finance and QEG have significant temporal and spatial differentiation
Available online 12 September 2022
characteristics. Moreover, the regional disparities of digital finance show a significant
JEL classification: decline, and the regional disparities of QEG exhibit an upward trend. In terms of
E44 research methods, the relational data analysis paradigm and the quadratic assignment
G21 procedure help examine the impact of various factors, including digital finance on the
O16 regional disparities in QEG. The findings cover the following four aspects. First, from
O47 the perspective of the full sample, the regional disparities of digital finance have a
Q55 negative effect on the regional disparities of QEG. The influence of the narrowing regional
Q56
disparities of digital finance on widening the regional disparities of QEG is realized by
Keywords: widening the regional disparities in technological progress. The regional disparities of the
Quality of economic growth coverage breadth and usage depth of digital finance have a negative effect in the regional
Digital finance disparities of QEG. Among the factors, marketization is the primary factor affecting the
Regional disparities regional disparities of the QEG. Second, during the ‘12th Five-Year’ and ‘13th Five-Year’
Relational data analysis paradigm periods, the regional disparities of digital finance have played a negative role on the
Quadratic Assignment Procedure regional disparities of QEG, but the impact intensity is lower. Third, narrowing regional
disparities of digital finance can expand regional disparities of QEG in the east and
central regions. Finally, in terms of different years the role of digital finance in regional
disparities of QEG demonstrates a downward trend. This study has important academic
and practical significance for the sustainable development of China’s economy and has
theoretical and practical implications for the formulation and implementation of digital
finance related policies in the future. It also provides a basis for narrowing the regional
disparities in QEG in China and for promoting regional coordinated development.
© 2022 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights
reserved.
1. Introduction
China’s economy has achieved miraculous high-speed growth since the implementation of its reform and opening up,
but its extensive growth mode in the past has led to massive consumption of resources and environmental degradation.
The report at the 19th Session of the National Congress of China’s Communist Party pointed out that economic develop-
ment has transformed from high-speed growth to high-quality expansion. It is thus essential to promote changes in the
∗ Correspondence to: School of Economics and Management, Nanchang University, Nanchang, Jiangxi, China.
E-mail address: cclee6101@gmail.com (C.-C. Lee).
https://doi.org/10.1016/j.eap.2022.08.022
0313-5926/© 2022 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.
C. Lv, J. Song and C.-C. Lee Economic Analysis and Policy 76 (2022) 502–521
quality, efficiency, and power of economic growth and increase total factor productivity (TFP). China has implemented
the development concepts of innovation, coordination, green, opening, and sharing continuously (Hussain et al., 2022;
Shen et al., 2022; Wen et al., 2022; Zou et al., 2022). The 5th Plenary Session of the 19th Central Committee of China’s
Communist Party proposed to encourage green development, carry out the strategy of sustainable development, and push
forward comprehensive green transformation of economic and social development. Green total factor productivity (GTFP)
is the standard now to judge whether a region’s economy has achieved sustainable growth (Lee and Lee, 2022; Chen and
Golley, 2014; Liu et al., 2020; Wang et al., 2020). Together with emerging technology, digital finance is increasingly a
significant driving force for economic sustainable development (Deng et al., 2019; Lee and Wang, 2022).
China’s digital finance has developed quickly in recent years and is far ahead of most countries. The Digital Inclusive
Financial Index of Beijing University shows that the provincial median of digital finance in China rose from 33.58 in
2011 to 317.11 in 2019. According to ‘Top 100 Global FinTech in 2019’, there are 10 fintech (financial technology)
companies in China on the list, ranking third in the world. The 26th ‘Global Financial Center Index’ shows that Beijing,
Shanghai, Guangzhou, Shenzhen, and Hong Kong are among the top ten global fintech centers. Digital finance based on
information technology improves the efficiency of data processing through artificial intelligence and cloud computing,
while blockchain facilitates the update and real-time dissemination of data. As such, digital finance has had a tremendous
impact on existing financial models for broadening the source of risk assessment, tapping the potential needs of users,
and improving the efficiency of risk pricing (Gomber et al., 2017; Chen et al., 2019; Lee and Chen, 2021; Wu et al., 2022).
At present, regional imbalances in the quality of economic growth (QEG) in China are increasingly being exposed (Xie
et al., 2017; Liu and Xin, 2019; Xia and Xu, 2020; Li and Chen, 2021). The development of digital finance may be of great
significance to alleviate the nation’s current development imbalance. What are the characteristics of China’s digital finance
and QEG? Does digital finance have a positive effect on narrowing the regional disparities of QEG in China? How strong
is its impact? What other factors affect regional disparities of QEG?
Through an in-depth exploration of the above issues, this research finds that digital finance and QEG have significant
spatial and temporal differences, and their regional disparities show a downward trend and upward trend, respectively.
The regional disparities of digital finance play a negative role in the regional disparities of QEG, and the narrowing of
the regional disparities of digital finance expand the regional disparities of QEG. Among all factors, marketization is the
primary one affecting the regional disparities of QEG. While regional disparities in the coverage breadth and usage depth
of digital finance negatively impact the regional disparities of QEG, the regional disparities of digital finance significantly
negative impact those same regional disparities in the east and central regions.
Compared with previous literature, the highlights of this paper are mainly reflected in the following three aspects.
First, this study takes digital finance as the research entry point for its impact on QEG. Second, based on the disparity
perspective, this study deeply explores the impact of the regional disparities of digital finance on the regional disparities
of QEG from different dimensions such as the full sample, different periods, different regions, and different years. Third,
this study uses the relational data analysis paradigm to study the question of regional disparities of QEG from a relatively
new perspective.
The remainder of this paper is organized as follows. Section 2 reviews the literature. Section 3 describes theoretical
analysis, research methods, and data sources. Section 4 analyzes the characteristic facts of digital finance and the
characteristic facts of QEG. Section 5 empirically examines the influence of factors including digital finance on regional
disparities of QEG. Section 6 presents conclusions and provides policy recommendations.
2. Literature review
An accurate measurement of digital finance is an important prerequisite for research. Beck et al. (2007) selected 8
indicators, such as geographic network penetration and loan-to-income ratio, to compare the access and use of financial
services in 99 countries from the dimensions of penetration. Mushtaq and Bruneau (2019) found that policies promoting
information and communications infrastructure could stimulate inclusive finance by advancing digital financial services.
Shen et al. (2020) used 14 indicators to construct the digital inclusive financial index of 101 countries from the four
dimensions of availability, usability, payment ability, and financial literacy. Song et al. (2020) applied CHFS data to
integrate digital financial indicators to explore the influence of digital finance on household consumption. Limited by
the availability of financial service data, the dimensions of most digital financial index systems are not comprehensive
enough, and the proportion of digital finance in the inclusive financial index is low (Guo et al., 2020; Wen et al., 2023).
The Digital Inclusive Finance Index of Peking University, which is issued by Peking University’s Institute of Digital Finance,
provides a reference for accurately measuring the level of digital finance in China. The index contains 33 specific indicators.
The digital financial index system is constructed according to the three dimensions of coverage breadth, usage depth, and
digitization level of the digital finance. On this basis, many scholars have carried out relevant research (Li et al., 2020;
Hsieh et al., 2022; Wang et al., 2022).
According to the different research focus, the measurement of QEG is mainly divided into three levels. First, the
multi-dimensional comprehensive index is constructed to measure QEG (Wen and Chen, 2008; Kong et al., 2021; Li
et al., 2021a,b). However, research from a comprehensive perspective is easily affected by index selection and weight
distribution and makes the calculation results quite different, resulting in the lack of effective comparability of relevant
research conclusions. Second, Green Economic Growth (GEG) (Lee et al., 2022c; Sohag et al., 2019) or Genuine Progress
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Indicator (GPI) (Kusago, 2007; Long and Ji, 2019) is used to represent QEG. However, the current GEG and GPI index
systems are not complete and unified, and it is difficult to obtain some data. Third, QEG is measured by GTFP (Kumar,
2006; Ahmed, 2012). The calculation methods of GTFP typically include parametric and non-parametric approaches.
Specifically, the parametric method is generally the Stochastic Frontier Approach (SFA) (Fritsch and Franke, 2004), and the
non-parametric method is Data Envelopment Analysis (DEA) (Guan and Chen, 2012; Ye et al., 2022). DEA does not need to
set the production function model in advance, and so it can avoid the function setting error and better simulate the actual
production process (Cook and Seiford, 2009; Zhang et al., 2019; Zhong et al., 2022). Studies have often used the Malmquist
index method based on the DEA model to estimate TFP. Chung et al. (1997) creatively adopted the Malmquist–Luenberger
(ML) productivity index to measure productivity growth after adding undesirable outputs, thus overcoming the defects
of the original Malmquist index. Though scholars have conducted research on this basis (Afsharian et al., 2019), it may
face the problems of a lack of circularity and infeasibility of linear programming when calculating cross-period directional
distance functions. To solve this, Oh (2010) improved the ML index and constructed the GML index. Some scholars have
further adopted the improved DEA method and used the SBM model to make up for the defects of the traditional model
(Tone, 2001; Fukuyama and Weber, 2009; Xie et al., 2017). The DEA-SBM model overcomes the overestimated efficiency
and miscalculation in the radial and angular distance function (Lin and Chen, 2018; Liu and Xin, 2019; Chen et al., 2022).
For the influence factors of regional QEG, many scholars have explored trade openness (Kong et al., 2021), foreign
direct investment (Qiu et al., 2021), environmental regulation (Yuan and Xiang, 2018), fiscal decentralization (Song et al.,
2018), green technology innovation (Wang et al., 2021), financial agglomeration (Xie et al., 2021), and other dimensions,
but there are relatively few studies targeting the influence of digital finance on QEG. Some scholars have also investigated
the influencing factors of regional disparities of QEG from the perspective of disparity. Liu and Li (2018) used the variance
decomposition method to explore the reasons for the regional disparities in GTFP based on the technical perspective and
factor perspective. From the viewpoint of structural composition, Li and Dong (2021) adopted the variance decomposition
method to analyze the source of regional disparities in high-quality development in terms of region and structure. Zhao
and He (2022) explored the impact of digital finance on green development with GTFP as the proxy variable based on
China’s urban data from 2011 to 2019 and found that digital finance promotes China’s green development. Li et al.
(2021a,b) studied the impact of digital finance on economic green development with GTFP as the proxy variable and
its internal mechanism based on China’s urban data from 2011 to 2018 and found a significantly positive U-shape non-
linear relationship between digital finance and green development. Zhang and Yang (2022) adopted the System Gaussian
Mixture Model method and found an inverted U-shape non-linear relationship between digital finance and high-quality
development. Yang et al. (2022) used a dynamic panel data model to explore the externality of digital finance on air
pollution. They presented that the development of digital finance destroys the environment, but when its development
exceeds a certain level it can reduce pollution. Jiang and Zhou (2021) conducted an empirical test through the panel data
model and found that the impact of digital finance on high-quality development presents an inverted N-shape trend.
The above literature provides important references for the research of this paper, but there are also the following
deficiencies. First, most existing literature focuses on the impact of foreign investment, openness, and other factors on
QEG, while only a few studies focus on digital finance. Second, most studies look at the relationship between digital
finance and QEG. Few scholars target the impact of the regional disparities of digital finance on the regional disparities of
QEG from an unbalanced perspective. Third, a large part of the related literature generally uses variance decomposition,
econometric model, and other methods to study regional disparities, which can only explain regional disparities of QEG
as a whole, while ignoring the relationship between two regions.
To fill the gap in the literature and solve these problems, we utilize GTFP measured by the DEA-SBM model and
combined with the GML index to calculate QEG in China. We then take the Digital Inclusive Finance Index of Peking
University as the proxy variable of digital finance. The paper adopts the relational data analysis paradigm and uses the
Quadratic Assignment Procedure to explore the impact of digital finance and other factors on the regional disparities of
QEG.
3. Theoretical analysis, research methodology, and data sources
This chapter conducts theoretical analysis of the influence of various factors including digital finance on the regional
disparities of QEG and constructs a theoretical analysis framework. We then introduce the main research methods of the
relational data analysis paradigm and quadratic assignment procedure. Finally, we explain the calculation of each variable
and data source.
3.1. Theoretical analysis
3.1.1. Digital finance and regional disparities of QEG

Digital finance refers to traditional financial institutions and Internet companies using digital technology to achieve
investment and financing, payment, and other new financial business models. With the help of big data, artificial
intelligence, blockchain, and other means, digital finance can use modern information technology to expand the scope
of financial services, reduce service costs without increasing financial outlets, reach rural and remote areas, and make use
of the long tail effect of scientific and technological platforms to lower the marginal cost close to zero.
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Digital finance is able to promote economic growth by alleviating financing constraints (Kapoor, 2014; Zhang et al.,
2022). Digital finance breaks the long-standing ‘Pareto principle’ of financial services, enabling financial ‘long-tail’
customers to obtain the required financial support, so that financial services benefit vulnerable groups like small
enterprises and residents in remote areas. Digital finance has an important impact on solving the problem of unbalanced
and inadequate regional development by providing financial services for ‘long-tail’ population (Yu and Wang, 2021; Lee
et al., 2022). Excessive financial development will excessively absorb the productive resources of the real sector and
generate financial bubbles (Santomero and Seater, 2000), resulting in financial resource misallocation and hindering the
development of the real economy (Orhangazi, 2008; Wen et al., 2021). Thus, digital financial models such as online lending
platforms have a certain substitution effect on the business of traditional commercial banks. The business competition
between banks to seize the remaining market share has intensified, and the financial risks between traditional banks have
also increased, which are harmful to the coordinated development of the economy. Digital finance easily combines with
technical risks and network risks, resulting in new financial risks with stronger concealment, faster transmission speed,
and wider dissemination, but which have a negative effect on economic growth.
From the perspective of corporate sector behavior, financial constraints can reduce GTFP by inhibiting the innovation
efficiency of enterprises (Zhang and Vigne, 2021; Cai et al., 2022; Lee et al., 2022b). Digital finance can expand the financing
channels of enterprises and especially alleviate financing constraints of innovative high-growth ones (Xiang et al., 2018),
making it conducive to promoting their technological innovation and improving QEG. With the help of digital financial
platform, enterprises and projects that may produce high pollution can be screened out, thereby limiting the inflow of
financial resources of high-pollution enterprises and projects. By providing environmentally friendly financial services,
financial resources can be guided to tilt toward environmentally friendly enterprises, thereby improving QEG. Conversely,
when alleviating financing constraints of enterprises, under a loose regulatory environment, digital finance may lead
them to not enter high pollution industries. The continuous expansion of their production scale may cause an increase of
pollutant emissions and inhibit improvement of QEG.
From the perspective of consumer behavior, digital finance has a green attribute that can link personal behavior
with green transactions, carbon emissions, and so on. Consumers can choose to buy cleaner and low-energy products
that reduce energy consumption and promote QEG. Digital finance also provides more convenient financial services
such as mobile payment and online lending for areas with insufficient traditional banking services, thus expanding the
consumption channels in these areas (Jagtiani and Lemieux, 2018). Moreover, digital finance eases the constraints on
consumers’ ability for payment, thus stimulating the rapid growth of consumption and aggravating pollutant emissions,
which may have a negative impact on improving QEG (Sadorsky, 2010; Zhou et al., 2022; You et al., 2022).
The influence of digital finance on QEG is therefore uncertain. The development of digital finance shows obvious
disparities in various regions of China. Whether digital finance can narrow the regional disparities of QEG needs a further
empirical test.
3.1.2. Other factors influencing the regional disparities of QEG

The first factor influencing QEG is human capital, which may promote QEG by strengthening technological innovation
and the technological catch-up effect. The second factor is foreign direct investment. On one side, foreign enterprises have
advanced management experience and manufacturing technology, and their spillover effect is conducive to improving
local labor productivity and technological innovation level, thereby improving QEG. On the other side, high-pollution
enterprises are transferred from developed countries to developing countries by means of foreign investment, thus
deteriorating the environment and perhaps inhibiting the improvement of QEG in developing countries. The third factor
is urbanization. Improvement in the level of urbanization may raise the degree of intensification and the ability to deal
with environmental pollution, which is conducive to improving QEG, whereas traditional urbanization is mainly driven
by various factors. The drawback of the extensive development model at the cost of environmental pollution is becoming
extremely prominent, which may hinder the improvement of QEG. The fourth factor is marketization. Improving the
level of marketization may promote technological innovation and micro-level production efficiency via improving the
innovation incentive mechanism of enterprises. It further influences the efficiency of resource allocation, which in turn
affects QEG. The fifth factor is the energy consumption structure. Coal is the main fossil energy in social production, and
the ratio of its consumption to total energy consumption is relatively large. This results in serious environmental pollution,
which has an impact on QEG. On the other hand, as a cheap energy input, coal may reduce production costs and may be
conducive to promote QEG. Therefore, this paper refers to the research of Chen and Haynes (2017), Li and Lin (2017), and
Liu and Xin (2019) and selects the above five factors into the study of regional disparities of QEG.
Based on the previous analysis, the theoretical analysis framework established in this paper is shown in Fig. 1. It is
assumed that QEG in regions A and B is gtfpA and gtfpB , respectively. The disparities of QEG between regions A and B
is represented by gtfpA − gtfpB , and the regional disparities of digital finance, human capital, foreign direct investment,
urbanization, marketization, and energy consumption structure are represented as fintA − fintB , humA − humB , fdiA − fdiB ,
urbA − urbB , marA − marB , and esA − esB , respectively. The regional disparities of the above factors help explain the regional
disparities of QEG. Extending from two regions to many regions, the regional disparities of QEG between different regions
can be explained by the regional disparities of the above factors in different regions.
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Fig. 1. Theoretical analysis framework.
3.2. Research methods
Traditional econometric methods require independence between variables, but relational data analysis does not satisfy
this assumption, embodying the relationship between the two actors. The relational data analysis paradigm examines the
issue of regional disparities in QEG from a novel perspective. If each region is regarded as an actor, then the regional
disparities between QEG constitute a relationship. In the relational data model, the row elements and column elements
in the residual matrix are not independent, which will lead to the autocorrelation problem of the model (Krackhardt,
1988; Tiwari et al., 2022). In addition, there may be multiple collinear problems between the variables of the relational
data model, and the significance test of the traditional measurement test method will lose its due effect. To overcome
the problem of autocorrelation and multicollinearity of the relational data model, a non-parametric test method based on
a random permutation, Quadratic Assignment Procedure (QAP), has gradually gained popularity (Burris, 2005; Lee et al.,
2012; Wang and Lee, 2022).
3.2.1. Model setting

This paper sets the relational data model as the following form.
D = γ0 + γ1 X + γ2 Z + V (1)
Here, γ0 , γ1 , and γ2 are variable coefficients, D is the explained variable, X is the core explanatory variable, Z is the
control variable, and V is the residual item. All variables in the relational data model are n-order matrices, and the specific
forms are shown in matrices (2)–(4). The observed values dij , xij , and zij in the matrix represent the difference between
the two regions in the explained variable, the core explanatory variable, and the control variable, respectively. The specific
data are calculated by di − dj , xi − xj , and zi − zj . When i = j, the main diagonal observed values of the matrix are all 0.
0 d12 ··· d1,n−1 d1,n

⎛ ⎞
⎜ d21 0 ··· d2,n−1 d2,n ⎟

⎜ ⎟
⎜ . .. .. .. .. ⎟
D = ⎜ .. . . . . ⎟ (2)
⎜ ⎟
⎜ ⎟
⎝dn−1,1 dn−1,2 ··· 0 dn−1,n ⎠
⎜ ⎟
dn,1 dn,2 ··· dn,n−1 0

0 x12 ··· x1,n−1 x1,n
⎛ ⎞
⎜ x21 0 ··· b2,n−1 x2,n ⎟

⎜ ⎟
⎜ . .. .. .. ..
X = ⎜ ..
⎟
. . . . (3)
⎜ ⎟
⎟
⎜ ⎟
⎝xn−1,1 xn−1,2 ··· 0 xn−1,n ⎠
⎜ ⎟
xn,1 xn,2 ··· xn,n−1 0

506
0 z12 ··· z1,n−1 z1,n

⎛ ⎞
⎜ z21 0 ··· z2,n−1 z2,n ⎟

⎜ ⎟
⎜ . .. .. .. .. ⎟
Z = ⎜ .. . . . . ⎟ (4)
⎜ ⎟
⎜ ⎟
⎝zn−1,1 zn−1,2 ··· 0 zn−1,n ⎠
⎜ ⎟
zn,1 zn,2 ··· zn,n−1 0
3.2.2. Quadratic Assignment Procedure (QAP)

QAP includes correlation analysis and regression analysis. Correlation analysis studies the correlation between two
matrices, whereas regression analysis studies the regression relationship between one matrix and multiple matrices. The
two methods are similar in principle. Taking regression analysis as an example, the QAP method includes the following
two steps.
First, the matrix is transformed into a long vector, and the regression coefficients between matrices are calculated.
Transform matrices (2)–(4) into a n (n − 1) dimension vector, as shown in Eq. (5). The OLS regression is then conducted
on the long vector to obtain the goodness of fit R2 and the regression coefficient set Ψ(D, XZ).
d1,2 x1,2 z1,2
⎛ ⎞ ⎛ ⎞ ⎛ ⎞
⎜ d ⎟ ⎜ x ⎟ ⎜ z ⎟
⎜ 1,3 ⎜ 1,3 ⎜ 1,3
⎟,X = ⎜ . ⎟,Z = ⎜ .
⎟ ⎟ ⎟
D=⎜ .. ⎜ . ⎜ .
⎟ (5)
⎝ . ⎝ . ⎝ .
⎜ ⎟ ⎟ ⎟
⎠ ⎠ ⎠
dn,n−1 xn,n−1 zn,n−1
Second, permute each row and each column of the dependent variable matrix randomly, and calculate the regression
coefficient after random permutation. The estimation result using the variable matrix replacement method is still biased
(Dekker et al., 2007), while the estimation result using the residual matrix replacement method is unbiased. Hence, this
paper uses the DSP (Double Semi-Partialing) method in the residual matrix replacement method to carry out a significance
test, which is more robust than the FLSP (Freedman-Lane Semi-Partialing) method. It is assumed that there is a linear
relationship between X and Z in Eq. (1), as shown in Eq. (6), where U represents the residual item; when σ ̸ = 0, then X
and Z exhibit multicollinearity, and the estimator ε̂XZ is shown in Eq. (7), where σ̂ is the OLS estimator of Eq. (6).
X = σZ + U (6)
ε̂XZ = X − σ̂ Z (7)
A new residual matrix Γ (ε̂XZ ) (Γ is marked as random permutation) is obtained by random permutation of the rows
and columns of ε̂XZ . After repeated random permutation, the reference value of statistics is estimated and tested by Eq. (8).
D = γ0 + γ1 Γ (ε̂XZ ) + γ2 Z + V (8)
When γ1 = 0, Eqs. (1) and (8) are the same. If the estimation error of σ − σ̂ is ignored, then the residual matrix after
random permutation has the same distribution with U - namely:
Γ ε̂XZ = Γ (σ − σ̂ )Z + U
( ) ( )
(9)
This step is repeated many times, and the regression coefficient value and the determination coefficient obtained after
each random permutation are saved, thereby obtaining the regression coefficient set Ψ(D, Γ (ε̂XZ )) and estimating the
standard error of statistics. In multiple random permutations, the proportion of the occurrence times of the regression
coefficients generated by random permutations greater than or equal to the long vector regression coefficients in the first
step to the total number of times is defined as plarge . The ratio of the occurrence times of the regression coefficient of
the long vector in the first step to the total number of times is defined as psmall . Because of the overlap between them,
the sum may not be 1. plarge and psmall are the p values of the statistical test (Nagpaul, 2003). The regression coefficient
adopts the double-tailed test. When the regression coefficient is positive, plarge is taken as the p value of the statistical
test. When the regression coefficient is negative, psmall is taken as the p value of the statistical test. R2 adopts a one tailed
test, and the p value of R2 is expressed by the ratio of the number of times that R2 generated by random permutation is
greater than or equal to the long vector regression R2 in the first step to the total number of random permutations.
3.3. Data sources
We utilize annual data of 30 provinces (excluding Tibet, Hong Kong, Macao, and Taiwan) in China during the years
2011–2019 for study. Regional disparities of QEG are the explained variable, regional disparities of digital finance
are the core explanatory variable, and regional disparities of human capital, foreign direct investment, urbanization,
marketization, and energy consumption structure are the control variables. All variables are in a 30 × 30 matrix, and
the measurement indicators and data sources of each variable are described as follows.
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Explained variables. Regional disparities of QEG. This paper selects GTFP as the proxy variable of QEG. Referring to
Lin and Chen (2018), Liu and Lee (2022), Liu and Xin (2019), and other practices, the DEA-SBM model and GML index
are adopted to calculate and decompose the GTFP of 30 provinces for 2011–2019. Capital, labor, and energy are input
factors. The expected output and undesirable output are measured by gross domestic product (GDP) and environmental
pollution, respectively. In terms of data processing, capital stock is taken as the measurement )index of capital investment.
The perpetual inventory method is used, and its calculation equation is: Ki,t = Ki,t−1 1 − δi,t + Ii,t , where Ki,t represents
(
the capital stock in year t of region I; Ii,t represents the investment in year t of region I; and δi,t represents the depreciation
of fixed assets in year t of region i. The selections of depreciation rate, investment, and initial capital stock continue
the practice of Zhang et al. (2004). The capital stock of each province during the years 2011–2019 is obtained through
calculation, and the relevant data are sourced from China Statistical Yearbook (CSY). Labor input is measured by the
number of employees, and the relevant data are from the statistical yearbooks of each province. Energy input is estimated
by the total energy consumption, and the relevant data are from the China Energy Statistical Yearbook (CESY). Expected
output is measured by regional real GDP. By deflating nominal GDP, regional real GDP is obtained. The relevant data are
from CSY. Based on the research of Liu et al. (2020), unexpected output is estimated by emissions of sulfur dioxide and
chemical oxygen demand. The relevant data are sourced from China Statistical Yearbook on Environment (CSYE) and CESY.
Since the Global Malmquist–Luenberger index only measures the current growth rate relative to the previous period, we
refer to the practice of Liu and Xin (2019) to convert GTFP, technical efficiency, and technical progress index of each
province over the years into the cumulative growth index with 2010 as the base period. Based on the measured data
of GTFP and its decomposition items in each province, the disparity matrix of QEG, the disparity matrix of technological
progress, and the disparity matrix of technological efficiency are further constructed, which are represented by gtfp, tc,
and ec, respectively.
Core explanatory variables. Regional disparities of digital finance. Digital finance is the main form of inclusive finance,
but most existing inclusive finance index systems ignore the importance of emerging digital finance models. The Digital
Inclusive Finance Index of Peking University is a supplement to the existing relevant index system and the index
calculation focusing on traditional inclusive finance. It has vertical comparability and horizontal comparability, reflecting
the multi-level diversification of digital financial services. This paper uses the digital inclusive financial index and sub-
index data of coverage breadth, usage depth, and digitization level during 2011–2019 issued by the Peking University’s
Institute of Digital Finance. The digital financial disparity matrix, coverage breadth disparity matrix, usage depth disparity
matrix, and digitization level disparity matrix are further constructed, which are expressed by fint, fin1, fin2, and fin3,
respectively.
Control variables. (1) Regional disparities of human capital. The average year of education is used to measure human
capital. The equation is: hum = 6X1 + 9X2 + 12X3 + 16X4 . Among them, X1 , X2 , X3 , and X4 are the proportions of
residents with primary school, junior high school, high school, and college education in the population of the region
aged 6 and above, respectively. Human capital disparity matrix is further constructed. The relevant data are sourced
from China Statistical Yearbook of Population and Employment and are represented by hum. (2) Regional disparities of
foreign direct investment (FDI). The ratio of total foreign investment to GDP is used to measure FDI, and the matrix of
FDI disparity is constructed. The relevant data are derived from CSY and represented by FDI. (3) Regional disparities of
urbanization. The ratio of urban population to total population is adopted to estimate urbanization level. The relevant
data are derived from CSY, and the urbanization disparity matrix is further constructed, which is represented by urb.
(4) Regional disparities of marketization. The data of the Marketization Index of China’s Provinces compiled by Wang
et al. (2019) of the National Economic Research Institute help measure marketization level. Since the data in the report
are only updated to 2016, the marketization index of each province from 2017 to 2019 is calculated by the moving
average method, and the marketization disparity matrix is further constructed, expressed by mar. (5) Regional disparities
of energy consumption structure. We use the ratio of coal consumption to total energy consumption to estimate the
energy consumption structure, set up the disparity matrix of energy consumption structure, and derive the relevant data
from CESY, expressed as es.
4. Characteristic facts of digital finance and QEG
This chapter analyzes the characteristic facts of digital finance and QEG. First, this paper presents statistical analysis
on the temporal and spatial differentiation and regional disparities’ characteristics of digital finance. It then conducts
statistical analysis on the temporal and spatial differentiation and regional disparities’ characteristics of QEG.
4.1. Characteristics facts of digital finance
4.1.1. Temporal and spatial differentiation characteristics of digital finance

The development level of digital finance is shown in Fig. 2. The level of digital finance shows obvious regional
differences during the period 2011–2019 in China. The provinces with higher levels of digital finance are gathered in
the east coastal areas. From east to west, the development level of digital finance generally shows an obvious decreasing
trend. In 2011 the average value of the digital finance index was 59.16 in the east region, 31.57 in the central region, and
28.91 in the west region. The average value of digital finance in the east region was 2.05 times that of the west region.
508
Fig. 2. The development level of digital finance.
Table 1
Average digital financial index of all provinces in China.
Year Digital finance index Coverage breadth Usage depth Digitization level
2011 40.80 35.31 47.49 46.75
2012 100.72 82.01 118.02 131.09
2013 156.69 122.18 174.70 237.92
2014 180.94 171.34 155.58 258.76
2015 221.13 192.82 174.19 399.90
2016 231.27 209.81 215.70 330.43
2017 272.86 247.01 294.36 319.17
2018 301.07 282.99 288.17 384.21
2019 324.73 308.98 313.48 397.19
There were six provinces with a high level of digital finance: Shanghai, Beijing, Zhejiang, Guangdong, Jiangsu, and Fujian;
and they are all in the east region. It reflects that the level of digital finance there was far ahead of the central and west
regions at the beginning. In 2019 the average value of digital financial index was 354.19 in the east region, 312.78 in
the central region, and 303.08 in the west region. The average value of digital finance in the east region was 1.17 times
that of the west region. There were six provinces with a high level of digital finance: Shanghai, Beijing, Zhejiang, Jiangsu,
Guangdong, and Fujian. This shows that although digital finance in the east region still exhibits great advantages, the
relative differences in the development level of digital finance between the east region and the central and west regions
are narrowing. One possible explanation is that due to the publication of ‘G20 High-Level Principles for Digital Financial
Inclusion’, the development of digital finance in various regions is becoming more standardized and the development level
is increasing, especially in the central and west regions. During 2011–2019, Shanghai, Beijing, and Zhejiang were always
the top three provinces in digital finance, reflecting the strong spatial agglomeration characteristics of digital finance.
Table 1 lists the overall digital finance in China for the period 2011–2019. The level of digital finance increased
continuously. The average digital financial index of each province rose from 40.80 in 2011 to 324.73 in 2019, and the
annual average growth rate was 35.11%. In terms of the digital finance sub-index, coverage breadth increased from 35.31
in 2011 to 308.98 in 2019, and the annual average growth rate was 35.54%. Usage depth increased from 47.49 in 2011
to 313.48 in 2019, and the annual average growth rate was 33.07%. The degree of digitization went from 46.75 in 2011
to 397.19 in 2019, and the average annual growth rate was 41.02%. This reflects the strong development momentum
of digital finance in China. A possible explanation is that due to the prominent contradiction of insufficient supply of
traditional finance in China, it is quite difficult for small enterprises to obtain sufficient loans from banks. In addition, the
rapid development and popularization of digital technologies such as mobile payment, coupled with a relatively loose
regulatory environment, have made digital finance advance rapidly in recent years.
4.1.2. Regional disparities of digital finance

The Gini coefficient is used to measure the regional disparities of digital finance. Table 2 describes the trend of the
Gini coefficient of digital finance in China. The Gini coefficients of digital financial index, coverage breadth, usage depth,
and digitization level all show an obvious downward movement. The Gini coefficient of the digital financial index dropped
509
Table 2
Gini coefficient of digital finance.
Year Digital finance index Coverage breadth Usage depth Digitization level
2011 0.2394 0.4067 0.2569 0.2286
2012 0.1140 0.1758 0.1461 0.0592
2013 0.0850 0.1157 0.1265 0.0303
2014 0.0662 0.0817 0.1206 0.0334
2015 0.0527 0.0744 0.1056 0.0299
2016 0.0477 0.0653 0.0706 0.0361
2017 0.0455 0.0517 0.0686 0.0155
2018 0.0525 0.0482 0.0852 0.0304
2019 0.0545 0.0495 0.0872 0.0332
Fig. 3. The development level of quality of economic growth.
from 0.2394 in 2011 to 0.0545 in 2019, and the average annual growth rate was −14.41%. In 2012 the Gini coefficient
dropped rapidly, turning 52.39% lower than that in 2011 and reflecting the rapid narrowing of the regional disparities
in digital finance. Innovative digital finance may quickly penetrate economically underdeveloped regions with its strong
geographical penetration.
In terms of sub-indicators, the Gini coefficient of coverage breadth in 2011–2012 was the largest, followed by usage
depth, while the Gini coefficient of digitization level was the smallest. In 2013–2019 the Gini coefficient of usage depth
was the largest, followed by coverage breadth. The reason may be that the coverage of financial services in developed
regions and underdeveloped regions were quite different, and so regional disparities in the coverage breadth were large
at the initial stage. With the popularization of smartphones, the coverage of digital finance has expanded rapidly, but due
to the different financial knowledge and financial experience of users in different regions, the use frequency of digital
finance is quite different. Therefore, the regional disparities in usage depth were slightly large in the late stage of digital
financial development. The Gini coefficient of digital financial coverage breadth decreased the largest, from 0.4067 in 2011
to 0.0495 in 2019, with an average annual drop of 20.79%. The Gini coefficient of usage depth and digitization level fell by
an average of 10.38% and 6.70% per year. This reflects that the regional disparities of digital finance in China have obvious
narrowing characteristics.
4.2. Characteristics of QEG
4.2.1. Temporal and spatial differentiation characteristics of QEG

The development level of QEG is described in Fig. 3. In terms of different regions,1 QEG in the east region was generally
higher than in the central region during 2011–2019. QEG in the central region was also much higher than in the west
region. Specifically, the average value of QEG in the east, central, and west regions was respectively 1.1219, 1.0587, and
0.9496 in 2011. The provinces with higher QEG were Hainan, Jilin, Tianjin, Beijing, Hunan, Liaoning, Jiangxi, Shanghai,
1 The east region includes Shanghai, Beijing, Zhejiang, Hebei, Tianjin, Liaoning, Shandong, Jiangsu, Guangdong, Hainan, and Fujian for a total of 11
provinces. The central region includes Anhui, Jilin, Heilongjiang, Hubei, Inner Mongolia, Shanxi, Henan, Jiangxi, and Hunan for a total of 9 provinces.
The west region includes Guizhou, Yunnan, Chongqing, Sichuan, Guangxi, Shaanxi, Qinghai, Gansu, Ningxia, Xinjiang, and Tibet for a total of 11
provinces.
510
Table 3
Average QEG of all provinces in China.
Year gtfp tc ec
2011 1.0455 1.0218 1.0306
2012 1.0695 1.0449 1.0306
2013 1.1709 1.1410 1.0321
2014 1.2233 1.1932 1.0302
2015 1.3076 1.2796 1.0243
2016 1.2657 1.3085 0.9683
2017 1.3237 0.9711 1.3636
2018 1.3801 1.0139 1.3756
2019 1.4292 1.0294 1.4081
Table 4
Gini coefficient of QEG.
Year gtfp tc ec
2011 0.0723 0.0919 0.0378
2012 0.0636 0.0805 0.0402
2013 0.0996 0.1054 0.0439
2014 0.1076 0.1083 0.0453
2015 0.1222 0.1133 0.0479
2016 0.0926 0.0784 0.0441
2017 0.0965 0.0804 0.0446
2018 0.0918 0.0934 0.0577
2019 0.0949 0.1009 0.0670
Guangxi, and Jiangsu. The average value of QEG in the east, central, and west regions was respectively 1.4751, 1.4549,
and 1.3556 in 2019. The provinces with higher QEG were Hainan, Chongqing, Guangxi, Jilin, Tianjin, Henan, Anhui, Hunan,
Fujian, and Sichuan. This reflects that QEG has obvious spatial and temporal differentiation characteristics in China.
Overall QEG appears in Table 3 for 2011–2019. QEG, as measured by GTFP, shows a gradual upward trend. It rose
from 1.0455 in 2011 to 1.4292 in 2019 at an average annual growth rate of 4.04%. Except for the decline in 2016, QEG
in the remaining years maintained a growth trend, with the largest growth rate of 9.48% in 2013. Except for Guizhou
and Inner Mongolia, the average annual GTFP of other provinces was bigger than 1, and QEG improved steadily. From
the decomposition of GTFP, technological progress (tc) has always maintained an upward trend with an average annual
growth rate of 4.12%. Technological efficiency (ec) was generally low and small, roughly showing a ‘decline-rise’ trend. In
2016 and 2017, technical efficiency did not improve, but actually deteriorated. After 2018, technical efficiency rebounded.
Technological progress was the primary driver of GTFP growth in China. Low technological efficiency offset part of the
promotion effect of technological progress on GTFP growth and resulted in an invisible loss of input resources, which
became a constraint of QEG.
4.2.2. Regional disparities of QEG

The Gini coefficient is used to measure the regional disparities of QEG, and the trend of the Gini coefficient of QEG
appears in Table 4. During 2011–2019, the Gini coefficient of QEG measured by GTFP was gradually rising, from 0.0723 in
2011 to 0.0949 in 2019, and the average annual growth rate was 5.57%. It has the development characteristic of ‘decline-
rise-decline-rise’. Specifically, the Gini coefficient of QEG in 2011–2012 showed a downward trend, continued to rise
in 2013–2015, reached the maximum in 2015, decreased in 2016, and had a fluctuating upward trend in 2017–2019.
From the decomposition term of GTFP, the trend of the Gini coefficient of technological progress was basically consistent
with QEG. From 0.0919 in 2011 to 0.1009 in 2019, the annual average growth rate was 2.73%. The Gini coefficient of
technical efficiency increased significantly, and its annual average growth rate was 7.90%. Specifically, the Gini coefficient
of technical efficiency had a slow upward trend in 2011–2015. The Gini coefficient of technical efficiency decreased in
2016. The Gini coefficient of technical efficiency increased rapidly in 2017–2019, and the annual average growth rate
was 15.59%. In general, the regional disparities of QEG in China show a gradual upward trend during the study period.
A possible explanation is that economically developed regions adjust their industrial structure by developing high-tech
manufacturing and modern service industries, while less developed regions rely on heavy industry and resource-based
industries and pay insufficient attention to environmental protection, which leads to the widening regional disparities of
QEG.
5. Empirical results and analysis
This chapter makes an empirical analysis from the aspects of QAP correlation analysis and QAP regression analysis. It
focuses on the factors influencing regional disparities of QEG from the dimensions of the full sample, different periods,
different regions, and different years.
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Table 5
QAP correlation analysis results.
Variable gtfp fint hum fdi urb mar es
gtfp 1.0000∗∗∗ 0.2880∗∗ 0.3340∗∗ 0.2620∗ 0.2900∗∗ 0.4470∗∗∗ −0.3670∗∗
fint 0.2880∗∗ 1.0000∗∗∗ 0.7120∗∗∗ 0.8210∗∗∗ 0.8470∗∗∗ 0.8720∗∗∗ −0.4930∗∗∗
hum 0.3340∗∗ 0.7120∗∗∗ 1.0000∗∗∗ 0.7020∗∗∗ 0.8780∗∗∗ 0.5910∗∗∗ −0.2500∗
fdi 0.2620∗ 0.8210∗∗∗ 0.7020∗∗∗ 1.0000∗∗∗ 0.8500∗∗∗ 0.6620∗∗∗ −0.5110∗∗∗
urb 0.2900∗∗ 0.8470∗∗∗ 0.8780∗∗∗ 0.8500∗∗∗ 1.0000∗∗∗ 0.7520∗∗∗ −0.3770∗∗∗
mar 0.4470∗∗∗ 0.8720∗∗∗ 0.5910∗∗∗ 0.6620∗∗∗ 0.7520∗∗∗ 1.0000∗∗∗ −0.4360∗∗∗
es −0.3670∗∗ −0.4930∗∗∗ −0.2500∗ −0.5110∗∗∗ −0.3770∗∗∗ −0.4360∗∗∗ 1.0000∗∗∗
∗ ∗∗ ∗∗∗
Notes: (1) , , and indicate significance at the 10%, 5%, and 1% levels, respectively. (2) The variables are a 30 × 30 matrix. (3) Random permutation
is 5000 times. (4) The variables include gtfp (quality of economic growth), fint (digital finance), hum (human capital), fdi (foreign direct investment),
urb (urbanization), mar (marketization), and es (energy consumption structure).
5.1. QAP correlation analysis
This paper takes the average value of the data of each variable from 2011 to 2019, and then the disparity matrix of the
average value of each variable is constructed. Ucinet 6 software is used to carry out QAP correlation analysis between each
variable disparity matrix, and the correlation results are in Table 5. There is a clear positive correlation between regional
disparities of QEG and regional disparities of digital finance, human capital, FDI, urbanization, and marketization and
a negative correlation between regional disparities of energy consumption structure. From the value of the correlation
coefficient, the closeness between the regional disparities of marketization and the regional disparities of QEG is the
highest, with a correlation coefficient value of 0.4470, followed by the energy consumption structure. The degree of
closeness between digital finance, human capital, urbanization, FDI, and regional disparities of QEG is relatively low. There
is a significant correlation between the above factors and the regional disparities of QEG, which verifies the theoretical
logic of this paper, but the correlation does not represent the regression relationship. QAP regression analysis is needed
to estimate the real impact of the regional disparities in digital finance on the regional disparities in QEG.
The values of correlation coefficients between marketization, urbanization, FDI, human capital, and digital finance are
0.8720, 0.8470, 0.8210, and 0.7120, respectively. In addition to digital finance, there is a high correlation between other
variables that significantly relate to the regional disparities of QEG. Specifically, the value of the correlation coefficient
between human capital and urbanization is as high as 0.8780, and the value of correlation coefficient between FDI and
urbanization is 0.8500. If the above factors are included in the model together with digital finance, and then under the
traditional estimation methods the multicollinearity between explanatory variables leads to biased regression results
and resulting in unreliable research findings. Therefore, QAP regression analysis is adopted to empirically test the above
influence factors of the regional disparities in QEG.
5.2. QAP regression analysis
In order to test whether digital finance can narrow the regional disparities of QEG, QAP regression analysis is used
to estimate its influence from the four levels of the full sample, different periods, different regions, and different years
and to analyze the specific impact of various factors including digital finance on the regional disparities of QEG. The
QAP regression results report the un-standardized regression coefficient and the standardized regression coefficient
respectively. The un-standardized regression coefficient closely relates to the dimension of the observed value. Under
the dimension constraint, if the un-standardized regression coefficients of different variables are compared, then it
is meaningless, and the standardized regression coefficient eliminates the influence of dimension and thus provides
more useful information (Burris, 2005). Although the two values are different, the symbol is the same — that is, after
standardization the direction of the variable does not change. Therefore, the standardized regression coefficient is adopted
to compare the values of standardized regression coefficients of different variables and to further estimate the effect of
different factors on the regional disparities of QEG.
5.2.1. Full sample regression analysis

5.2.1.1. Full sample regression based on regional disparities of QEG. Taking the regional disparities of QEG as the explained
variable, the QAP regression results of the full sample are described in Table 6. Specifically, the standardized regression
coefficient of the digital financial index (fint) is −0.8423, reflecting that reducing the regional disparities in digital finance
widens the regional disparities of QEG. For every 1% increase in the regional disparities of digital finance, the regional
disparities of QEG drop by 0.8423%. Among all the factors, the influence of digital finance on the regional disparities of
QEG is stronger than that of marketization, and so digital finance has become an important force affecting the regional
disparities of QEG.
This empirical result of the regional disparities of digital finance having a negative effect on the regional disparities of
QEG is different from the findings of Zhao and He (2022). The reason may be that, on the one hand, poor groups cannot
equally obtain credit resources from banks, because of problems such as the social credit system, and so they face the
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Table 6
Full sample regression results based on regional disparities of QEG.
Variable Un-standardized coefficient Standardized coefficient Significance plarge psmall
fint −0.0072 −0.8423 0.0260 0.9750 0.0260
hum 0.1575 0.6715 0.0240 0.0240 0.9760
fdi 0.0010 0.1696 0.3300 0.3300 0.6710
urb −0.0100 −0.5810 0.1180 0.8820 0.1180
mar 0.1061 0.9684 0.0050 0.0050 0.9950
es −0.0015 −0.3246 0.0490 0.9520 0.0490
Adj· R2 0.4070 (0.0000)
Obs 870
Notes: (1) The variables are all 30 × 30 matrices. (2) Random permutation is 2000 times. (3) The values in Adj· R2
brackets are p values. (4) The variables include fint (digital finance), hum (human capital), fdi (foreign direct investment),
problem of credit exclusion. In addition, commercial banks, for the purpose of pursuing profits, have seen an outflow of
savings resources in poor areas with the help of the financial system, further weakening the local endogenous capital
accumulation capacity and thus inhibiting poverty reduction (Wang and Zhu, 2018). This has widened the disparities in
QEG between poor areas and developed areas. On the other hand, digital finance eases corporate financing constraints in
a relaxed regulatory environment, resulting in enterprises that originally are unable to enter highly polluting industries to
get into that market, and QEG is inhibited ultimately. Due to lagging supervision, the problem of insufficient regulation of
digital finance itself is prominent. Digital finance models such as online loan platforms increase the possibility of financial
risks. With the continuous expansion in the scale of digital finance, risk factors gradually converge that have a negative
impact on the improvement of QEG (Zhang, 2018). Compared with economically backward regions, the developed regions
in China have a higher level of digital finance, which brings a greater inhibitory effect on QEG. Therefore, the regional
disparities of digital finance have a negative effect on the regional disparities of QEG.
Among the control variables, the regional disparities of human capital (hum) have a positive influence on the regional
disparities of QEG, and their standardized regression coefficient is 0.6715. Human capital may impact economic growth
through the technological innovation effect. The improvement of human capital quality helps to conduct green technology
innovation, thereby improving energy efficiency, reducing pollution emissions, and enhancing QEG. The level of human
capital is higher in the developed east region. Therefore, reducing the imbalance of human capital between regions can
narrow the regional disparities of QEG. Marketization (mar) has a positive influence on the regional disparities of QEG. The
standardized regression coefficient of marketization is 0.9684. Marketization is the primary factor affecting the regional
disparities of QEG. One possible reason is that the improvement of marketization level may ameliorate the innovation
incentive mechanism of enterprises and spur technological innovation. This may reduce environmental pollution and
overcapacity, thereby promoting the improvement of QEG. Compared with underdeveloped regions, the developed east
region has a higher level of marketization. Therefore, reducing the regional disparities of marketization can narrow the
quality disparities of QEG. The regional disparities in energy consumption structure (es) have a negative influence on
the regional disparities of QEG with standardized regression coefficient of −0.3246. A possible reason is that coal-based
energy structure is quite hard to change in the short term. As a cheap energy input, coal is widely used in production.
Coal resources are rich in the central and west regions, and so consumption of it is done on a large scale, while the cost
of coal resource development and utilization is low. Therefore, the widening regional disparities in energy consumption
structure will narrow the regional disparities of QEG.
5.2.1.2. Full sample regression based on the decomposition of regional disparities of QEG. This paper further estimates the
influence of various factors on regional disparities of technological progress and technological efficiency. Model 1 and
Model 2 show that the regression results of explained variables have regional disparities in technological progress and
regional disparities in technological efficiency, which are described in Table 7.
From Model 1, the regional disparities of digital financial index (fint) have a negative influence on the regional
disparities of technological progress. The standardized regression coefficient of the digital financial index is −0.9486. The
narrowing of the regional disparities of digital finance expands the regional disparities of technological progress. This may
be explained by excessive digital finance leading to the ‘off-real to virtual’ of funds, which cannot effectively serve the real
economy, and the efficiency of resource allocation will also be reduced, which will adversely affect technological progress
(Zhang and Yang, 2022). The regional disparities of urbanization and energy consumption structure have a negative
influence on the regional disparities of technological progress. The standardized regression coefficients are respectively
−0.7715 and −0.3726. The reason why the regional disparities of urbanization have a negative effect on the regional
disparities of technological progress may be that the extensive development model in the process of urbanization mainly is
factor-driven, and the waste of resources and environmental pollution inhibit the improvement of technological progress.
The east region has a higher urbanization rate and greater obstacles to technological progress when compared to the
central and west regions. Therefore, the expansion of regional disparities in urbanization will narrow the disparities of
technological progress between regions. The regional disparities of human capital (hum) and market (mar) have a positive
impact on regional disparities of technological progress. The standardized regression coefficients are 0.8705 and 0.9719,
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Table 7
Full sample regression results based on the decomposition regional disparities of QEG.
Variable Model 1: Dependent variable is TC Model 2: Dependent variable is EC
Standardized coefficient Significance Standardized coefficient Significance
fint −0.9486 0.0130 0.2033 0.3610
hum 0.8705 0.0050 −0.4639 0.1270
fdi 0.2927 0.1680 −0.2660 0.2480
urb −0.7715 0.0470 0.5513 0.1970
mar 0.9719 0.0030 −0.0641 0.4400
es −0.3726 0.0210 0.2556 0.1240
Adj· R2 0.4860 (0.0000) 0.1050 (0.0330)
Obs 870 870
Table 8
Full sample regression results based on the digital financial sub-index.
Model 1 Model 2 Model 3
Variable Coefficient Variable Coefficient Variable Coefficient
fin1 −0.7101∗∗ fin2 −0.5908∗ fin3 0.0411
hum 0.6492∗∗ hum 0.6265∗∗ hum 0.5685∗
fdi 0.0974 fdi 0.1035 fdi −0.0941
urb −0.4366 urb −0.7611∗ urb −0.6372
mar 0.7869∗∗∗ mar 0.9427∗∗ mar 0.5306∗∗
es −0.2734∗ es −0.3713∗∗ es −0.2903∗
Adj· R2 0.4010 (0.0000) Adj· R2 0.3690 (0.0010) Adj· R2 0.3210 (0.0010)
Obs 870 Obs 870 Obs 870
Notes: (1) ∗ , ∗∗ , and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively. (2) The variables are in a
30 × 30 matrix. (3) Random permutation is 2000 times. (4) The values in Adj· R2 brackets are p values. (5) The
variables include fin1 (coverage breadth), fin2 (usage depth), fin3 (digitization level), hum (human capital), fdi (foreign
direct investment), urb (urbanization), mar (marketization), and es (energy consumption structure).
respectively. The impact strength of digital finance is larger, second only to market, and digital finance is the leading
factor of regional disparities in technological progress.
From Model 2, the digital financial index (fint) is not statistically significant, reflecting that digital finance does not
have any impact of regional disparities in technical efficiency that might expand the regional disparities of QEG. All control
variables are not statistically significant. In summary, the impact of reducing the regional disparities in digital finance on
expanding the regional disparities of QEG is achieved by expanding the regional disparities of technological progress.
5.2.1.3. Full sample regression based on the digital financial sub-index. The full sample QAP regression results with the
regional disparities of QEG as the explained variable and the regional disparities of coverage breadth (fin1), usage depth
(fin2), and digitization level (fin3) of digital finance are taken as the core explanatory variables and described in Table 8.
From Model 1 the standardized regression coefficient of coverage breadth of digital finance is −0.7101. If the regional
disparities in the coverage breadth of digital finance narrow by 1%, then the regional disparities of QEG expand by
0.7101%. The regional disparities of human capital (hum) and marketization (mar) have a positive influence on the regional
disparities of QEG. The standardized regression coefficients are 0.6492 and 0.7869, respectively. The regional disparities
of energy consumption structure (es) have a negative effect on the regional disparities of QEG, and the standardized
regression coefficient of energy consumption structure is −0.2734.
From Model 2 the standardized regression coefficient of usage depth of digital finance is −0.5908. For every 1%
reduction in the regional disparities in the usage depth of digital finance, the regional disparities of QEG expand by
0.5908%. The regional disparities of human capital (hum) and marketization (mar) have a positive influence on the regional
disparities of QEG. The standardized regression coefficients of human capital and marketization are respectively 0.6265
and 0.9427. The regional disparities of energy consumption structure (es) and urbanization (urb) have a negative influence
on the regional disparities of QEG, and the standardized regression coefficients are −0.3713 and −0.7611, respectively.
From Model 3 the digitization level of digital finance is not statistically significant. The regional disparities of human
capital (hum) and marketization (mar) have a positive influence on the regional disparities of QEG. The standardized
regression coefficients of human capital and marketization are 0.5685 and 0.5306, respectively. The regional disparities of
energy consumption structure (es) have a negative effect on the regional disparities of QEG with standardized regression
coefficient of −0.2903.
514
Table 9
Based on different period regression results.
Variable Standardized coefficient Standardized coefficient
of ‘12th Five-Year’ Period of ‘13th Five-Year’ Period
fint −0.6906∗ −0.4949∗
hum 0.5788∗∗ 0.6365∗∗
fdi −0.0273 −0.0039
urb −0.1270 −0.7974∗∗
mar 0.5820∗∗ 1.0308∗∗∗
es −0.3258∗∗ −0.3396∗∗
Adj· R2 0.3040 (0.0010) 0.4650 (0.0000)
Obs 870 870
Notes: (1) ∗ , ∗∗ , and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.
(2) The variables are a 30 × 30 matrix. (3) Random permutation is 2000 times. (4) The
values in Adj· R2 brackets are p values. (5) The variables include fint (digital finance), hum
(human capital), fdi (foreign direct investment), urb (urbanization), mar (marketization),
and es (energy consumption structure).
5.2.2. Based on different periods’ regression analysis

Consistent with China’s five-year plans, the study period is divided into ‘12th Five-Year’ (2011–2015) and ‘13th Five-
Year’ (2016–2019)2 for QAP regression analysis. Based on the different periods, the regression results are described in
Table 9.
From the period of the ‘12th Five-Year’, the regional disparities of digital financial index (fint) play a negative role
on the regional disparities of QEG, and its standardized regression coefficient is −0.6906. If the regional disparities of
digital finance narrow by 1%, then the regional disparities of the QEG expand by 0.6906%. In the control variables, the
regional disparities of human capital (hum) and marketization (mar) have a positive influence on the regional disparities
of QEG, and the standardized regression coefficients are respectively 0.5788 and 0.5820. The regional disparities of energy
consumption structure (es) have a negative influence on the regional disparities of QEG, and its standardized regression
coefficient is −0.3258. Compared with other factors, digital finance plays the greatest role in regional disparities of QEG,
which is the dominant factor affecting the regional disparities of QEG.
From the ‘13th Five-Year’ period, the standardized regression coefficient of digital financial index (fint) is −0.4949.
The regional disparities of human capital (hum) and marketization (urb) have a positive effect on regional disparities of
QEG. The standardized regression coefficients of human capital and marketization are 0.6365 and 1.0308, respectively. The
regional disparities of urbanization and energy consumption structure have a negative influence on regional disparities
of QEG. The standardized regression coefficients of urbanization and energy consumption structure are −0.7974 and
−0.3396, respectively.
According to a comparison of different periods, we find that the influence intensity of regional disparities in digital
finance on regional disparities of QEG shows a downward trend. One possible explanation is that since the ‘13th Five-Year’
period includes the promulgation of the ‘G20 advanced principles of digital finance’ document, the regional disparities
of digital finance have been further narrowed, and the influence of digital finance on the regional disparities in QEG has
decreased. In the ‘13th Five-Year’ period, digital finance is not the primary factor for the regional disparities of QEG. The
regional disparities of marketization have gradually become the primary factor affecting the regional disparities of QEG,
followed by urbanization and human capital. The impact of urbanization on regional disparities of QEG has changed from
an insignificant effect in the ‘12th Five-Year’ period to a significantly negative effect in the ‘13th Five-Year’ period. The
impacts of human capital and energy consumption structure on the regional disparities of QEG are basically consistent in
different periods.
5.2.3. Based on different regions’ regression analysis

This paper constructs the variable disparity matrix for each region and further studies the influencing factors of the
regional disparities of QEG in each region. The regression results are described in Table 10. For the east region, the
standardized regression coefficient of the digital financial index (fint) is −1.0786. The standardized regression coefficient
of energy consumption structure (es) is −1.1169. In terms of influence intensity, the influence intensity of digital finance
on regional disparities of QEG is lower than energy consumption structure in the east region. For the central region, the
standardized regression coefficient of digital financial index (fint) is −0.8387. It reflects that narrowing regional disparities
of digital finance can widen the regional disparities of QEG in this region. The standardized regression coefficient of
marketization (mar) is 2.1692. The reduction of regional disparities of marketization can narrow the regional disparities of
QEG. The standardized regression coefficient of energy consumption structure (es) is 0.7701. The decrease in the regional
disparities of energy consumption structure narrows the regional disparities of QEG in the central region. In terms of
impact intensity, marketization plays the greatest role in regional disparities of QEG in the central region, followed
2 Due to data update reasons, this paper only uses 2016–2019 data to replace the ‘13th Five-Year’ period.
515
Table 10
Based on different regions’ regression results.
Variable East region standardized coefficient Central region standardized coefficient West region standardized coefficient
fint −1.0786∗ −0.8387∗∗ −0.0135
hum −0.1741 0.2042 1.1831∗∗
fdi 0.3603 −0.1254 1.3861∗
urb −0.3809 0.3854 −0.8550∗
mar 0.5770 2.1692∗∗ −0.5602
es −1.1169∗ 0.7701∗ −0.7651∗∗
Adj· R2 0.3830 (0.0180) 0.8970 (0.0000) 0.8730 (0.0000)
Obs 110 72 90
Notes: (1) ∗ , ∗∗ , and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively. (2) The variables in the east, central, and west regions are
in a 11 × 11 matrix, 9 × 9 matrix, and 10 × 10 matrix, respectively. (3) Random permutation is 2000 times. (4) The values in Adj· R2 brackets are
p values.
Fig. 4. Regression coefficients of influencing factors in different years. Note: The variables include fint (digital finance), hum (human capital), fdi
(foreign direct investment), urb (urbanization), mar (marketization), and es (energy consumption structure).
by digital finance. In the west region, the influence of digital finance on regional disparities of QEG is not statistically
significant. The regional disparities of human capital play a positive role in the regional disparities of QEG in the west
region, and its standardized regression coefficient is 1.1831. The standardized regression coefficient of energy consumption
structure (es) is −0.7651. The regional disparities of FDI play a positive role on the regional disparities of QEG in the west
region, and its standardized regression coefficient is 1.3861. The regional disparities of urbanization (urb) play a negative
role in the regional disparities of QEG in the west region. Its standardized regression coefficient is −0.8550. From the
perspective of impact intensity, FDI is the dominant force affecting the regional disparities of QEG in the west region.
5.2.4. Based on different years’ regression analysis

The factors impacting regional disparities of QEG are subject to QAP regression year by year, and the standardized
regression coefficients are described in Fig. 4. During the period 2011–2019, the standardized regression coefficient of the
digital financial index (fint) shows a W-shape trend. In addition to 2011, the regional disparities of digital finance in other
years have a negative impact on the regional disparities of QEG. The year with the greatest impact is 2014, and then the
impact intensity decreased. Especially since 2017, the impact intensity of digital finance has continued to decline, and it is
basically consistent with the regression results, which is based on different periods. The standardized regression coefficient
of human capital (hum) has always been positive, and the regional disparities of human capital have a significantly positive
effect on regional disparities of QEG. Its influence intensity is relatively stable, which is consistent with regression results
in terms of different periods. The standardized regression coefficient of marketization (mar) generally shows an M-shape
development trend. In addition to 2011, the regional disparities of marketization have a positive influence on the regional
disparities of QEG. Since 2016, the impact of marketization on the regional disparities of QEG has increased, and the year
with the greatest impact is 2017. This is consistent with the regression results based on different periods. The standardized
regression coefficient of energy consumption structure (es) always maintains a negative value, and the fluctuation is small.
The regional disparities of energy consumption structure show a stable negative effect on the regional disparities of QEG.
The standardized regression coefficient of foreign direct investment (fdi) is not statistically significant in most years, and
the impact of regional disparities of FDI on QEG is not stable. The standardized regression coefficient of urbanization
(urb) is not statistically significant in most years, but since 2018 the regional disparities of urbanization have shown a
516
Table 11
Change the number of initial random seeds.
fint −0.0072 −0.8423 0.0350 0.9660 0.0350
hum 0.1575 0.6715 0.0250 0.0250 0.9760
fdi 0.0010 0.1696 0.2900 0.2900 0.7100
urb −0.0100 −0.5810 0.1230 0.8770 0.1230
mar 0.1061 0.9684 0.0030 0.0030 0.9970
es −0.0015 −0.3246 0.0540 0.9460 0.0540
Adj· R2 0.4070 (0.0000)
Obs 870
Table 12
Change the number of random permutations.
fint −0.0072 −0.8423 0.0310 0.9690 0.0310
hum 0.1575 0.6715 0.0240 0.0240 0.9760
fdi 0.0010 0.1696 0.3090 0.3090 0.6910
urb −0.0100 −0.5810 0.1110 0.8890 0.1110
mar 0.1061 0.9684 0.0020 0.0020 0.9980
es −0.0015 −0.3246 0.0460 0.9550 0.0460
Adj· R2 0.4070 (0.0000)
Obs 870
Table 13
Select the geometric mean of each variable.
fint −0.0053 −0.7214 0.0650 0.9360 0.0650
hum 0.1461 0.6381 0.0440 0.0440 0.9570
fdi 0.0005 0.0807 0.3950 0.3950 0.6060
urb −0.0084 −0.5071 0.1380 0.8630 0.1380
mar 0.0969 0.9074 0.0100 0.0100 0.9910
es −0.0014 −0.3049 0.0550 0.9460 0.0550
Adj· R2 0.3740 (0.0000)
Obs 870
significantly negative effect on regional disparities of QEG, which is similar with the regression results based on different
periods.
5.2.5. Robustness tests

In order to verify the reliability of the previous conclusions, the robustness tests are conducted from the following
aspects. First, in terms of QAP regression, different initial random seeds of QAP are set up, and an iterative operation
is carried out by Ucinet 6 software. In the new regression analysis results, the standardized regression coefficient and
significance test P value are basically consistent with the previous results. Taking the full sample regression results based
on the regional disparities of QEG as an example, the robustness test results are shown in Table 11. Second, the number
of random permutations of QAP regression is changed from 2000 times to 5000 times, and the regression results are
similar with previous results. Taking the full sample regression results based on the regional disparities of QEG as an
example, the robustness test results are in Table 12. Third, the above regressions are based on different periods and
different years respectively, and the trend of the standardized regression coefficients of variables is basically the same.
Finally, the arithmetic mean of each variable changes to the geometric mean of each variable during the period, and then
the disparity matrix is constructed for regression, and it is found that the results are similar with previous results. Taking
the full sample regression results based on the regional disparities of QEG as an example, the robustness test results are
shown in Table 13. Therefore, the above results of the study are relatively robust.
517
6. Conclusions and policy recommendations
The ‘14th Five-Year Plan’ of China and the outline of its long-term goals for 2035 point out that it is necessary for
the government to focus on improving the quality and efficiency of development and to exhibit sustained and healthy
economic development. This paper explores the impact of digital finance on the regional disparities of QEG and provides
useful policy considerations for promoting the coordinated development of QEG in China with the help of digital finance.
In terms of the data of 30 provinces in China during the period 2011–2019, we use the DEA-SBM model and GML index to
estimate QEG in each province and analyze the temporal and spatial differentiation characteristics and regional disparities
of digital finance and QEG. In the empirical analysis, we apply QAP to empirically test the effect of digital finance on
regional disparities of QEG. The findings include the following four aspects.
First, in terms of the full sample the regional disparities of digital finance have a negative effect on the regional
disparities of QEG. The impact of narrowing the regional disparities of digital finance on expanding the regional disparities
of QEG is realized by expanding the regional disparities of technological progress. The regional disparities of coverage
breadth and usage depth of digital finance play a negative role in the regional disparities of QEG. Among all factors,
marketization is the primary factor affecting the regional disparities of QEG. In addition, human capital and energy
consumption structure are also major factors affecting regional disparities of QEG.
Second, among different periods the regional disparities of digital finance have a negative effect on the regional
disparities of QEG in the ‘12th Five-Year’ and ‘13th Five-Year’ periods. However, the impact intensity has weakened.
Marketization is the primary factor affecting the regional disparities of QEG in the ‘13th Five-Year’ period.
Third, from the perspective of different regions, regional disparities of digital finance have a negative effect on regional
disparities of QEG in the east and central regions.
Fourth, in terms of different years the effect of digital finance on regional disparities of QEG generally shows a
downward trend, which is similar with the regression results based on the different periods. Therefore, digital finance
does not play a role in narrowing the regional disparities in QEG. Instead, the narrowing of the regional disparities in
digital finance widens the regional disparities in QEG.
Based on the above conclusions, the following policy recommendations are proposed. First, the government and
relevant authorities should pay attention to the construction of a digital financial supervision system. Digital finance is not
restricted by industry and region, and its speed and scope of risk dissemination are much faster than those of traditional
finance. In addition, it has a short development time and a low threshold for participation, creating the phenomenon of
confusion. For example, with the extreme growth of P2P, many risks have gradually been exposed, such as credit risk.
P2P lending was originally defined as a pure information intermediary and could not provide guarantee services. The P2P
lending platform does not have access to the credit information system of the People’s Bank of China, which means that
the lender does not have any effective source for assessing credit risk. If the lender is a deadbeat or the lender refuses
to repay the money, then the borrower has no ability to cope with it. The ‘Financial science and technology development
plan (2022–2025)’ points out that it is necessary to accelerate the comprehensive application of regulatory technology
and strengthen the construction of digital regulatory capacity. Therefore, relevant laws should be promulgated, industry
access standards should be formulated and implemented, the threshold for enterprise access should be clarified, and the
potential risks in the field of digital finance should have clear warnings and be quickly resolved.
Second, a differentiated digital financial development policy should be implemented. The level of economic devel-
opment varies in different regions, resulting in distinct disparities in the development capacity of digital finance. The
government should formulate differentiated digital financial policies based on the actual conditions in each region and
should avoid implementing one-size-fits-all policies. At the same time, digital finance should adhere to the principle
of moderate development, because excessive digital financial investment will lead to resource hoarding, waste, and
inefficient use and will have a restraining effect on the improvement of QEG. Therefore, digital finance should develop in
harmony with QEG, strive to find the most suitable relationship, and play a better role in narrowing the regional disparities
in QEG.
Third, there should be a focus on popularizing digital finance knowledge. Digital finance gets rid of the constraints
of geographical space and financial availability and reduces the threshold and cost of financial services. However, digital
finance does not change the nature of finance, nor does it reduce the professionalism and business complexity of financial
products. Digital financial institutions can cooperate with traditional financial institutions such as banks to continuously
popularize residents’ digital financial knowledge and improve their digital financial literacy.
This paper has certain limitations. First, due to the short time span spanning the rise of digital finance and less relevant
data, the sample period is relatively short from 2011 to 2019. The paper is also based on data of 30 provinces in China.
In the future city-level data or county-level data can be used to explore the impact of the regional disparities of digital
finance on the regional disparities of QEG. Second, the paper only adopts a quadratic assignment procedure to study
influencing factors of regional disparities in QEG. It does not compare and analyze the results with other econometric
models. Moreover, based on the disparity perspective, the paper explores the influence of regional disparities of digital
finance on regional disparities of QEG. It does not explore whether regional disparities of digital finance have a threshold
effect and intermediary effect on the regional disparities of QEG. Related research will be further carried out in the future.
518
Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have
appeared to influence the work reported in this paper.
Data availability
Data are available from the authors upon request.
Acknowledgment
All authors have read and approved the final manuscript.
Funding
We acknowledge financial support from the Research Center of Scientific Finance and Entrepreneurial Finance of the
Ministry of Education of Sichuan Province, China (KJJR2021-001 and KJJR2021-011); Jiangxi ‘‘Double Thousand Plan’’; the
project of ‘‘green innovation science and technology plan’’ of colleges and universities in Shandong Province: Research on
the redistribution effect of social security income in Shandong Province, China (No. 2020RWE003); the key project of the
13th five-year plan of education in Shandong Province: Research on the evaluation system of high quality development
indicators and regional collaborative mechanism of education in Shandong Provincee, China (No. 2020ZD029); Qingdao
social science planning project: Research on regional disparity and regional collaborative improvement of high quality
development in Qingdaoe, China (No. QDSKL2001247).
Ethical approval:
This article does not contain any studies with human participants or animals performed by any of the authors.
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Economic Analysis and Policy 76 (2022) 502–521

Contents lists available at ScienceDirect

Economic Analysis and Policy

Modelling economic policy issues

Can digital finance narrow the regional disparities in the

3. Theoretical analysis, research methodology, and data sources

3.1. Theoretical analysis

3.1.1. Digital finance and regional disparities of QEG

3.1.2. Other factors influencing the regional disparities of QEG

Fig. 1. Theoretical analysis framework.

3.2. Research methods

3.2.1. Model setting

0 d12 ··· d1,n−1 d1,n

⎜ d21 0 ··· d2,n−1 d2,n ⎟

dn,1 dn,2 ··· dn,n−1 0

⎜ x21 0 ··· b2,n−1 x2,n ⎟

xn,1 xn,2 ··· xn,n−1 0

0 z12 ··· z1,n−1 z1,n

⎜ z21 0 ··· z2,n−1 z2,n ⎟

zn,1 zn,2 ··· zn,n−1 0

3.2.2. Quadratic Assignment Procedure (QAP)

3.3. Data sources

4. Characteristic facts of digital finance and QEG

4.1. Characteristics facts of digital finance

4.1.1. Temporal and spatial differentiation characteristics of digital finance

Fig. 2. The development level of digital finance.

4.1.2. Regional disparities of digital finance

Fig. 3. The development level of quality of economic growth.

4.2. Characteristics of QEG

4.2.1. Temporal and spatial differentiation characteristics of QEG

4.2.2. Regional disparities of QEG

5. Empirical results and analysis

5.1. QAP correlation analysis

5.2. QAP regression analysis

5.2.1. Full sample regression analysis

5.2.2. Based on different periods’ regression analysis

5.2.3. Based on different regions’ regression analysis

5.2.4. Based on different years’ regression analysis

5.2.5. Robustness tests

6. Conclusions and policy recommendations

Declaration of competing interest

Data are available from the authors upon request.

All authors have read and approved the final manuscript.

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