This paper builds a dynamic general equilibrium model with endogenous technological innovation and structural transformation, proposing a digital industry growth theory driven by digital infrastructure that advances technological innovation and structural transformation. The relative scale between digital and traditional industries determines the industrial allocation of digital infrastructure services, while these services in turn enhance total factor productivity across sectors. This characteristic not only incentivizes technological innovation, thereby propelling the development of new quality productivity, but also changes the relative share of the digital industry, thereby promoting structural transformation. Since the growth rate of digital industry is conjointly influenced by the development of new quality productivity, structural transformation and data factor accumulation, there exists an optimal intensity of digital infrastructure construction to maximize digital industry growth. This optimal intensity increases when the elasticity of substitution between digital and traditional industries decreases or when the positive externalities of digital infrastructure increases, but decreases when the relative scale of digital industry expands. The policy implication of the paper is that, given that digital infrastructure exerts a crowding-out effect on private sector factor accumulation and technological innovation, its construction should be scaled back once it has driven the development of the digital industry to a significant scale or rendered it difficult to effectively replace traditional industries.
Guo et al. (Sun,) studied this question.