Digital agglomeration and inclusive productivity in China: a dynamic threshold analysis

This study examines the nonlinear relationship between digital agglomeration and inclusive total factor productivity (ITFP) across 277 Chinese prefecture-level cities during 2011–2020. Using dynamic panel threshold regression, we identify a robust GDP-based threshold (lnGDP = 10.463, 90% CI: [10.404, 10.487]), with supporting evidence from innovation environment thresholds and imprecise absorptive capacity thresholds. Below the GDP threshold (~35,000 RMB per capita), digital agglomeration has negligible productivity effects; above it, effects become positive. Findings corroborate endogenous growth theory’s emphasis on complementarities between technology and local capabilities and suggest that development-based policy targeting is more reliable than capacity-based approaches.