Target Setting for the Digital Economy in China: A DEA Bargaining Approach with General Production Network Structure

Abstract

Over the past two decades, China's digital economy (DE) has grown significantly, and this is mainly due to investments in digital infrastructure, technological advancements, and government support. Despite this growth, regional disparities and sustainability challenges persist. This study aims to develop a more realistic and equitable target-setting framework for improving DE performance across provinces in China. We propose a generalized Network Data Envelopment Analysis (NDEA) model with a Nash bargaining mechanism, which allows cooperative optimization of inputs, intermediate products, and outputs among stages and subprocesses within a network production structure. The methodological innovation lies in its ability to capture interdependencies among subprocesses and distinguish between desirable, undesirable, and neutral intermediate products, thereby integrating green development considerations. Our empirical results show substantial improvement potential across provinces, with differentiated targets in areas such as energy consumption, software income, and ecommerce sales. The proposed model not only advances methodological development in the NDEA but also provides policymakers with a practical tool for promoting balanced regional development and sustainable digital transformation in China.