Study on the Drivers of Inclusive Green Growth in China Based on the Digital Economy Represented by the Internet of Things (IoT).

With the vigorous development of digital economy based on digital technologies such as Internet of things (IoT), big data, and artificial intelligence, new vitality has been injected into China's economic model. Inclusive green growth (IGG) supports the transformation of society towards a better quality of life and well-being, as well as environmental protection. Therefore, it is crucial to identify the main drivers of IGG. However, IGG is subject to a variety of interpretations and lacks definitional clarity. To brigade this gap, this study primarily evaluates the performance of IGG and explores the key drivers on IGG in China. Specifically, the data envelopment analysis (DEA) model is employed to calculate IGG for 281 cities in China during 2005-2020. Subsequently, we take advantage of a nest of machine learning (ML) algorithm to demonstrate the vital drivers of urban IGG, which avoids the defects of endogenous linear hypothesis of traditional econometric methods. The results indicate that digitization represented by the IoT and other digital technology is the core drivers of the urban IGG in the overall sample, accounting for about 50% among all of drivers. This finding provides new evidence supporting the "high-quality development" strategy in China, as well as shedding light on grasping the principal fulcrum to achieve the transformation towards IGG in developing economies similar to China.

1. Introduction

China has accomplished remarkable achievements after the reform and adoption of the opening-up policy, and the level of urbanization and industrialization has increased rapidly. However, the extensive pursuit of economic growth in high speed has led to a series of social and environmental problems. With the improvement in China's economy, the disharmony among different regions, the wide gap between the rich and the poor, and the deterioration of the ecological environment have become increasingly prominent, which have prevented people from sharing the benefits brought about by the growth and caused severe challenges to sustainable development, where environmental damage and damage of social equity are often ignored[1-3]. After the Rio +20 Summit in 2012, the concept of inclusive green growth (IGG) was proposed originally, which aims to combine the interests of industrialized countries with green growth and inclusive growth of developing countries. The 2015 UN Sustainable Development Goals agenda further clarified inclusive green growth (IGG) and provided ideas for China's economic development model transformation. China is entering a period of high-quality development, and coordinating the three systems of economy, society, and environment will efficiently provide a pathway for sustainable development. This precipitates a move away from pursuing economic growth speed to environmental protection, as well as reducing the gap between the rich and the poor, thus realizing that the contemporary social members could equally share the benefits of economic growth as well as considering the interests of the future generations. This involves the coordinated ideas of efficiency and equity, and this transformation will determine the future of China's economy and the profound changes in the world economic situation.

Although China has been late to address sustainable development issues, continuous efforts are now being made in this field, especially via the central government's exploration of the growth of the inclusive and green economy [4, 5]. In 2011, in the 12th Five-Year Plan, the central government initially pointed out the vision of IGG. In 2016, the 13th Five-Year Plan further proposed the “five development concepts” of innovation, coordination, green, openness, and sharing, which identifies IGG as the main goal to achieve sustainable development. In 2017, the report of the 19th National Congress of the Communist Party of China proposed that China should shift the economy model from rapid growth to high-quality development in the future, and it is necessary to promote the innovation-driven development, regional coordination, and achievement sharing, shifting from “unbalanced distribution” to “common prosperity,” accelerating the construction of ecological civilization, and changing from “high carbon growth” to “green development.” It clarifies that IGG is an essential tool to achieve high-quality development in the new normal of economy period. In 2021, the 14th Five-Year Plan emphasized again to focus on unlocking the major issue of insufficient and imbalance economic development, as while as narrowing the gap between urban and rural areas, improving the level of cogovernance of society, and sharing of the wealth of nation, thus enhancing public welfare in a fair way. Additionally, the protection and governance of the ecological environment have become an extremely important planning, and it is indispensable to promote the harmonious coexistence between mankind and nature. Thus, it is quite urgent to deal with the issues such as the lack of “greening” and weak “inclusiveness” in the traditional growth mode in China. These inclusive green development concepts and strategies are compatible with each other. Therefore, the agenda for China's future is to achieve high-quality development by promoting IGG.

However, the current academic field has not formed a complete study on the method of implementation, the measurement system, and influencing factors of IGG, and its core definition has not been unified. To solve these problems, this paper tries to answer the following questions. First, what is the core concept of IGG based on China's national conditions and how to measure it in China? Second, how is the level of IGG in Chinese cities? Third, what are the main factors affecting China's IGG? Finally, what policies should Chinese government formulate to promote IGG and to contribute to the World? The purpose of addressing these issues is to reflect China's embrace of IGG.

The contribution of this study includes two aspects. First of all, it uses DEA model to measure the level of inclusive green growth efficiency (IGGE) in 281 Chinese cities from 2005 to 2020. It also reveals multiple drivers of IGG, in contrast to previous literature, which focuses on the influence of a single factor. This paper not only integrates the role of various factors, but also calculates the contribution of various factors in influencing IGG. Secondly, our work also expands the literature on the application of advanced machine learning (ML) techniques in empirical research in economics. For example, Adetunji et al. [6] explored the use of Random Forest ML technique for house price prediction. Mustafa et al. [7] trained an artificial neural network (ANN) model to recognize the pattern of the financial market and use this model to detect whether and when the market pattern has changed. Ben Jabeur et al. [8] employed a nest of ML, such as the LightGBM, CatBoost, XGBoost, Random Forest (RF), and neural network models, to predict oil prices during the COVID-19 pandemic. Richardson et al. [9] evaluated the real-time performance of popular ML algorithms in obtaining accurate nowcasts of real GDP growth for New Zealand. We advance this line of research by applying the ML technique to circumvent the multicollinearity issue in determining drivers of the urban IGG in China and providing policy suggestions, as to expand the application of ML algorithm in economics.

The remaining sections of this paper are organized as follows. Section 2 is a literature review, which combs the concept of IGG to deeply understand what IGG is and what the core concept of IGG is in China. Section 3 is the research design; we adopt the DEA model to measure the level of IGG and employ the machine learning (ML) algorithm to explore the key drivers of IGG in China. Section 4 is characteristics of IGG and plausible explanatory variables for IGG. Section 5 is determinants of IGG calculated by ML algorithm. Section 6 is conclusions and policy suggestions; we summarize the full text and propose policy suggestions, as well as pointing out the limitations of this paper.

2. Literature Review

2.1. Definition of IGG

In the 1870s, in the classic work capital, Marx considered the issues of fairness and justice and people's livelihood welfare everywhere. He believed that workers were the creators of wealth and should also be the owners of wealth. And he called on the society to pursue fairness and justice, resisting the exploitation of capital and reducing the gap between the rich and the poor. Since human society entered the 21st century, the world has experienced remarkable economic growth, especially in developing countries, where its success stories have become famous. However, inequality and the gap between the rich and the poor are still increasing, which means that the acceleration of growth has not had a subtle impact on people's social welfare [10]. Therefore, it is necessary to change from the traditional economic growth that we are familiar with to a growth that can reduce inequality and poverty, so as to achieve a growth that is beneficial to the poor. Meanwhile, the world's economic growth has increased resource scarcity and environmental issues and diverted the focus of the countries from traditional economic growth towards green growth [11]. The United Nations World Commission on Environment and Development proposed the concept of sustainable development, where the goal is to “meet the needs of the present without compromising the ability of future generations to meet their own needs” [12]. This concept of sustainable development is not clear about how to coordinate the relationship between ecological environment and society when developing economy, so it lacks maneuverability. Inclusive green growth (IGG) is a sustainable development mode that pursues economic development, social equity, people' s welfare, achievements sharing, resources conservation, and ecological environment protection, as well as the comprehensive coordination of economy, society, and environment [13]. The term has become a buzz word for development planning and cooperation and is viewed as a means for achieving the sustainable development goals [14]. Unlike traditional growth theory, which represents “economy growth comes first,” IGG is more beneficial to the inclusiveness of equilibrium and social welfare, as while as environmental protection. And it is an accepted solution to solve the poverty, unfairness, and the degradation of the environmental issues worldwide.

Table 1 lists the main definitions of the concept of IGG from literature; the ultimate goal of IGG is to achieve the coordinated and unified development of the three systems of social system, economy system, and the environmental system. And properly handling the relationship among the three systems can solve the problems of social inequity and environmental degradation in economic growth. Even though these concepts are based on different perspectives, the purpose and meaning behind them overlap, providing new ideas and contributions to global economic governance.

Table 1

Definitions of IGG in literature.

Institution or authors	Definition
The United Nations Environmental Program [15]	“To Improve human well-being and social equity, while significantly reducing environmental risks and ecological scarcities”
The World Bank [16]	“In order to meet the sustainable development goal, the inclusive growth must be green, and green growth must be inclusive”
Wu and Zhou [17]	“To pursue economic growth, social equity, sharing results, resource conservation, and a good ecological environment”
The International Monetary Fund [18]	“It is a model that eliminates poverty and environmental damage while achieving economic growth to achieve sustainable development”
Bouma and Berkhout [19]; Kessler and Slingerland [20]	“To balance the relationship between growth and inclusiveness, while paying attention to the current and future growth of people's welfare”
Berkhout et al. [14]	“It is an economic growth model that takes into account the welfare of the socially poor (inclusive) and future generations (green)”
Mandle et al. [21]	“To improve human well-being through the optimization of the ecosystem and the protection and restoration of natural assets such as land, water and biodiversity”
Kumar [22]	“The core elements comprise sustainable consumption and production, equitable outcomes, and investments for environmental sustainability”
He and Du [23]	“It is a new way to attain sustainable development, aims to achieve comprehensive and coordinated economic, social, and environmental development”

In the literature of sustainable development goal, scholars have continuing controversial views. Some scholars believe that economic growth will promote the inclusive in society and green development in ecology. Firstly, the economic growth of a region will empower government fiscal revenue and increase public infrastructure investment, as while as promoting technological progress and attracting foreign direct investment. On the one hand, it will benefit social care services sector—in particular early childhood education and care—as an effective target of fiscal spending for robust employment generation and gender inclusive growth [24-26]. On the other hand, it will increase the sharing of information, knowledge, and skills and thus drive employment and increase people's income [27]. Due to the “trickle-down” effect, it will provide opportunities for the poor, increase their income and welfare, promote fairness, and accomplish social inclusion. In addition, they believe that economic growth can even bring about an improvement in the natural environment and provide a higher level of sustainable development for global green growth [28]. For example, economic growth can improve labor productivity through improving health level, eliminating market failures, and improving energy and environmental efficiency through subsidies. In addition, economic growth can enable more green infrastructure or technological innovation [29, 30].

However, the emerging Amsterdam School of Governance for inclusive development argues that perpetual economic growth is incompatible with “inclusion” as a multifaceted ambition: social inclusion fails without ecological inclusion (i.e., entitlements to the ecological basis for human well-being) and relational inclusion (i.e., control over decisions that affect well-being and its basis) [31-34]. This integrated understanding means that inclusive development is a “paired” concept, whereby “inclusive” is not an adjective but implies a postgrowth transformation of “development” [35]. In recent years, scholars have proposed the “postgrowth” theory, which aims for enhancing human well-being, social justice, and environmental health by equitably and deliberately downscaling (degrowth) of overconsumption, overaccumulation, and expropriation [36, 37]. This theory advocates the growth model needs to be changed, and GDP is not the only goal of development. On the premise of economy growth, it is necessary to reduce energy consumption and protect the environment and promote members of society to enjoy the fruits of development together [38, 39].

Inclusive development and degrowth focus on the relationship among the economy, society, and environment [40]. IGG is not a new concept, which is based on the theory of inclusive development and postgrowth, emphasizing the complete harmonization of the three systems mentioned by inclusive development. Because different countries have different development policies, the definition of IGG should also be different worldwide. In the current new normal period of China's economy, the high-quality development concept of “green, coordinated and shared” has been put forward [41], which coincides with the core concept of IGG. This paper holds that IGG in China is a holistic and systematic growth model constructed by three subsystems of economy, society, and environment. In the economic subsystem, besides paying attention to the GDP growth, it also emphasizes the reduction of income gap and the coordination between different regions. In the social subsystem, attention is paid to whether social members share education and medical care and participate in employment, etc. In the environmental subsystem, attention is paid to pollutant discharge and environmental treatment, and China's IGG can be expressed as follows:where Eco refers to economic growth or GDP growth. China is a developing country, and various problems must be solved to enable economic development; hence, GDP growth is still an important factor [1]. Soc refers to social equity; due to the huge differences in educational resources and capital between urban and rural areas in China, the problems of unequal opportunities and excessive income gap between urban and rural areas are more prominent [42]. Env represents environmental protection; it involves resource consumption and green technology change. Traditional high-carbon energy consumption and excessive development of heavily polluting enterprises are the main causes of environmental pollution. Assuming that the three conditions have diminishing marginal returns, the function G(·) represents the current IGG level.

2.2. Measurement of IGG

In previous study, human development index (HDI), which indicates countries combined achievements in education, health, and standard of living, has become, over time, the key reference indicator to assess countries' socioeconomic performance and is currently employed in wide-ranging areas of social sciences [43]. But the HDI's “original sin” of neglecting environmental and social sustainability issues has been discussed by researchers recently [44]. Dasgupta et al. [45] proposed the inclusive wealth index (IWI), and within this framework, economic progress is measured by growth in inclusive wealth, conceptualized by three categories of assets or capital: produced capital, human capital, and natural capital, and these aspects (among others) comprise the productive base of any country's economy [45]. The complex and interlinked problems of environment and development require simultaneous analysis of different dimensions of development processes, one of the new methodologies for this type of research is Sustainability Window analysis [46] Sustainability Window analysis is a tool for assessing the sustainability of development in all of its three dimensions simultaneously (environmental, economic, and social aspects) [47], and it is also used to analyze the level of IGG [46].

Although the concept of IGG is not unified at present, in recent years, some scholars have explored the measurement of it by using different methods. For instance, He and Du [23] took China as an example, using epsilon-based measure (EBM) model and Global Malmquist–Luenberger (GML) index to evaluate the efficiency of IGG of provinces in China, which fully considered environmental pollution and social imbalances. Albagoury [48] used the subjective weighting method to calculate the green growth and inclusive growth levels of Ethiopia to jointly reflect the inclusive green level. The Asian Development Bank [49] proposed an evaluation system including economic growth, social equity, and environmental sustainability and measured the level of IGG Asian subregion. Li et al. [50] constructed a scientific and reasonable IGG indicator system, using factor analysis supplemented by clustering method and entropy method to evaluate and cross-validate the IGG level of 37 countries and regions in the Asia-Pacific region. Narloch et al. [51] measured the IGG at the national level from five aspects: natural assets, resource efficiency and decoupling, resilience, and risks, as well as inclusiveness. Sun et al. [1] proposed a comprehensive directional distance function and slacks-based measure model to evaluate the IGG levels of 285 cities in China. However, the research scope and focus of the above literature are based on different perspectives of IGG, so they have certain limitations, such as lack of related study about the impact factor of IGG. In addition, developed countries and developing countries should have different emphasis in implementing IGG strategy and be based on specific circumstance. This paper attempts to establish a comprehensive evaluation framework based on the new era development concept of China's economy. The connotation of IGG integrates the concepts of inclusive growth and green development, aiming at pursuing an innovation-driven development model and paying attention to the coordination and unification of economic effects, social benefits, and ecological and environmental benefits.

3. Research Design

3.1. Measurement System of IGG

Referring to Sun et al. [1], we employ data envelopment analysis (DEA) model to measure urban IGG in China during the statistical period, which is one of the most important methods for efficiency estimation; it comprehensively evaluates the object from the perspectives of input and output and is more reasonable and scientific than the methods that simply consider output, such as principal component analysis and entropy weight method [23]. Previous studies have applied DEA model to evaluate efficiency, such as energy efficiency, the economic efficiency, innovation efficiency, and environmental efficiency. Tone and Tsutsui [52] proposed epsilon-based measure (EBM) model, which not only considers the radial proportion of input frontier value and actual value, but also reflects differentiated nonradial relaxation variables among various input factors, effectively improving the accuracy and scientific nature of the results. On this basis, this paper integrates the superefficiency DEA model to measure the IGGE of sample cities in China.

Assuming that the production system has  n decision making units (DMU), each DMU has three vectors, including input X, desirable output Y, and undesirable output Y, whose elements can be expressed as x ∈ R, y ∈ R 1, and y ∈ R 2; we define matrix X, Y, and Y as X = [x1,…, x] ∈ R, Y = [y1,…, y] ∈ R1×, and Y = [y1,…, y] ∈ R2×, where x > 0, y > 0, and y > 0(i = 1,2,…, n). The DEA-SBM model to evaluate efficiency is expressed aswhere s−, s,  s represent the input, desirable output, and undesirable output, respectively; and the weight vector is λ. The objective function σ is strictly monotonically decreasing with respect to s−, s, and s. σ denotes the efficiency evaluation index. When 0 ≤ σ ≤ 1, it means the ratio of input and output of DMU needs to be further improved. While σ ≥ 1, it indicates that the DMU is in the effective status.

Inputs: referring to Sun et al. [1], economy system runs need the labor and the capital to be involved. For this consideration, we use the total number of regional employees and private enterprises owners at the end of each year as the corresponding proxy variable.

Desirable outputs: for developing countries, an essential prerequisite for achieve IGG goal is keeping economic growth; thus, we select GDP by urban population to represent the desired outputs of economic growth.

Undesirable outputs: IGG emphasizes providing equal opportunities to participate in employment and equitable income distribution. Thus, the registered urban unemployment rate is selected as an undesirable output. Since China's income gap is mainly reflected in the urban-rural income gap, the urban-rural income ratio is also regarded as an undesirable output to represent income distribution. Additionally, we consider industrial sulfur dioxide, wastewater, and solid waste to represent the undesirable outputs related to environment.

3.2. Machine Learning Algorithms

Referring to Fan and Liu [53], we employ the machine learning (ML) algorithms to investigate the drivers of urban IGG in China, which include the random forest algorithm, the XGBoost algorithm, the CatBoost algorithm, and the LightGBM algorithm. Comparing to the traditional econometric model, the ML algorithm could not only overcome the multicollinearity problem among variables, but also calculate the contribution of each variable.

3.2.1. Random Forest Algorithm

Random forest (RF) regression is generated in the process of decision tree, which is based on the modeling data set sample observation and characteristic variables, respectively, through random sampling. Each time the sampling results are based on a tree [54, 55], and each tree is generated in accordance with its own attributes rules and values. The forest integrates all the rules of the decision tree and final judgment value, thus achieving the return of the random forest algorithm [56, 57]. In terms of input and output, input is an independent variable X, which is one or more definite or quantitative variables; and dependent variable Y is a quantitative variable, which is the output value and prediction effect of the model.

3.2.2. XGBoost Algorithm

XGBoost is an efficient implementation of GBDT. Different from GBDT, XGBoost adds regularization terms to the loss function [58]. And because some loss functions are difficult to compute derivatives, XGBoost uses the second-order Taylor expansion of the loss function as a fitting of the loss function. Therefore, XGBoost algorithm can better avoid the problem of overfitting. In addition, as an integrated algorithm of gradient lifting, the algorithm is highly efficient in terms of operation speed [59].

3.2.3. CatBoost Algorithm

CatBoost is a GBDT framework based on symmetric decision tree algorithm, which mainly solves the pain points of efficiently and reasonably processing classification features, processing gradient deviation and prediction deviation, and improving the accuracy and generalization ability of the algorithm [60]. CatBoost is able to build the most accurate model on a data set with minimal data preparation. In addition, it provides open-source interpretation tools and a way to quickly generate models.

3.2.4. LightGBM Algorithm

LightGBM is an efficient implementation of XGBoost. The idea is to scatter consecutive floating-point features into K discrete values and construct histogram of k width. Then the training data are iterated and the cumulative statistics of each discrete value in the histogram are calculated. In feature selection, we only need to find the optimal segmentation point according to the discrete value of the histogram. The leaf-wise strategy with depth limitation saves a lot of time and space [61].

4. Characteristics of IGG and Plausible Explanatory Variables for IGG

In this section, we mainly report the spatial dynamic evolution characteristics of the urban IGG in China in 4.1, which is calculated by DEA model in Section 3.1. Then, ten plausible explanatory variables for urban IGG which will be selected by combing the existing literature introduced in Section 4.2.

4.1. Spatiotemporal Dynamic Evolution of IGG

From Figure 1, we can see that the geographical distribution of IGGE in Chinese cities is uneven. Cities with high-level IGGE are mainly located in the southeast coastal areas and major municipalities directly under the central government, such as Beijing, Tianjin, Shanghai, and Chongqing. Simultaneously, Jiangsu and Zhejiang are most superior in China. These regions are endowed with superior resources, inherent location, infrastructure, and human capital and take the lead in economic growth, which are the foundation for priority IGGE. And IGGE in Heilongjiang and Inner Mongolia has been significantly improved. However, the urban IGGE level in the central region is relatively mediocre. The IGGE level in the western region is low, especially in Xinjiang, Xizang, Ningxia, Qinghai, Gansu, and Yunnan. This implies that, for developing countries similar to China, economic growth is still a prerequisite for improving IGGE [62].

Figure 1

The spatiotemporal dynamic evolution trend of IGGE in China during 2005–2020.

4.2. Plausible Explanatory Variables for IGG

This section will introduce a series of explanatory variables, and the selection of these variables is based on the existing literature. Furthermore, we will elaborate the proxy variables and selection process of these variables. Next, we will draw the thermodynamic diagram of the correlation coefficient between each explanatory variable in Figure 2 as well as their statistical description in Table 2.

Figure 2

The thermodynamic diagram among independent variables.

Table 2

Descriptive statistical results of variables.

Variable	Obs.	Mean	Std. dev.	Min	Max
IGE	4 496	0.374	0.0669	0.237	1.029
Pgdp	4 496	53706	34539	6457	467749
Fd	4 496	3.650	8.806	0.00917	98.29
Fdi	4 496	4.329	0.852	0.477	6.489
Gove	4 496	0.335	0.640	0.00241	1.871
inter	4 496	0.227	0.153	0.00347	0.870
lnpop	4 496	2.558	0.298	1.305	3.533
house	4 496	0.235	0.501	6.45e-02	1.289
innovation	4 496	6.147	13.67	0.0250	166.6
enterp	4 496	68.36	98.87	1.030	951.7
ind	4 496	0.724	0.582	0.114	1.168

4.2.1. Economic Development

The impact of economic development on IGG is debatable. In Kuznets hypothesis [62], economic growth exceeding a certain threshold will reduce the level of inequality. However, inequality continued to rise in both developing and OECD countries [63]. In terms of environmental impact, Grossman and Krueger [64] proposed the Environmental Kuznets Curve theory, which supposed an inverted U-shaped relationship between income level and environmental degradation. Thus, we employ GDP per capita (pgdp) to reflect the urban economic growth and explore its impact on urban IGG.

4.2.2. Financial Development

Referring to [65], better functioning financial systems foster economic growth and poverty alleviation; moreover, a more equitable distribution of economic opportunities enhances overall economic development. According to Ahmed et al. [66], financial development promotes green economic growth, as it enables industries to access advanced types of machinery that are environmentally friendly and slow down environmental degradation to a certain extent. In addition, the interaction between financial development and technological innovation is conducive to the sustainable and stable development of green growth [67]. Thus, financial development (fd) may play an important role in accomplishing IGG. This paper selects the ratio of the balance of deposits and loans to the GDP of the region to represent the financial development level of the cities.

4.2.3. Digitization

Digitization brings new growth impetus to the economy [68]. Digitization and the development of smart systems connected to IOT can benefit the three essential elements of the food-water-energy nexus, bring sustainable food production, have access to clean and safe potable water, and accelerate the generation and consumption of green energy so as to catalyze the transition towards sustainable manufacturing practices and enhance citizens' health well-being [69]. Thus, we use the urban Internet penetration rate (inter) as a proxy variable for digitization.

4.2.4. Foreign Direct Investment

Previous studies have confirmed the positive impact of foreign direct investment (fdi) on the host country, such as introducing more advanced technology and knowledge, promoting regional employment and so on [27]. Foreign direct investment is especially well suited to effecting cross-border adoption transfer and translating it into broad-based growth, not least by upgrading human capital [27]. Studies have shown that FDI is beneficial to the promotion of inclusive green total factor productivity (IGTFP) mainly through traditional total factor productivity. Simultaneously, the inflow of FDI promotes the economic growth, thus accelerating IGTFP. It should be noted that the aggravation of environmental pollution in the FDI process is an important factor hindering the IGTFP. We choose the actual utilization amount of FDI in the city to take the right number to represent its development level.

4.2.5. Government Intervention

Previous studies have shown that government spending contributes to equity in educational opportunities and poverty eradication [70]. Furthermore, the government's expenditure on infrastructure promotes employment and economic growth through investment [71]. The education level per capita, the level of infrastructure, and the change of economic system all promote IGG of cities. In addition, agricultural financial subsidies can alleviate farmers' poverty [72]. Therefore, we use the ratio of urban fiscal expenditure to regional GDP as the proxy variable of government intervention (gove) and explore its relationship with IGGE.

4.2.6. Urbanization Process

In recent decades, China's urbanization process has made breakthrough progress, reaching about 58% in 2016, higher than the average of the world and Asia [73]. Then, rapid urbanization accompanied by extensive planning will lead to high house prices, increased unemployment, and increased social inequality [74], causing misallocation of land resources, which may hinder the improving of IGG. According to Sun and Huang [75], the relationship between urbanization and emission efficiency is inverted U-shaped. This means that there may also be a nonlinear relationship between urbanization and inclusive economic growth. Therefore, we use the ratio of urban house investment to GDP (house) to represent the urbanization process.

4.2.7. Entrepreneurship

Existing research has proved positive connection between entrepreneurship [76] (especially female entrepreneurship) and inclusive growth, which may provide more employment opportunities for society. Additionally, green entrepreneurship can guide entrepreneurs to be fully aware of the prospects of environmentally friendly technologies and products and then push environmentally friendly innovation. Green entrepreneurship acts as a catalyst to accelerate environmental regulation effects and sustainable growth [77]. Thus, the number of newly established private enterprises in cities is the proxy variable of entrepreneurship (enterp). Next, we further study its relationship with IGG.

4.2.8. Innovation

Previous studies have verified the link between innovation, growth, and the environment. For instance, Ghisetti and Quatraro proposed that innovation can improve the efficiency of resource use, thereby reducing energy consumption and pollutant emissions per unit of output [67]. Furthermore, green innovation can give rise to green industries and create new market demand [78]. Some studies show that there is a complex nonlinear relationship between innovation and green development due to the multiple factors [79], which supports the viewpoint of ecological modernization theory. It is worth noting that innovation can have a significant impact on IGG from three dimensions of economic greening, ecological greening, and social greening [80]. Based on this, we choose the number of patent invention applications in each city as the agent variable of innovation (innovation).

4.2.9. Urban Size

From the relationship between population size and environment, if all other factors remain unchanged, population size and growth increase pressure on urban land cover and CO2 emissions. However, when considering the indirect effects of population size and growth on income and technology, it may offset or even reverse population environmental pressure [81]. Therefore, we choose the logarithm of urban population to represent the size of the city and study its impact on urban IGG in China.

4.2.10. Industrial Structure

For developing countries, the upgrading of industrial structure will promote the productive employment of the second and third industries, so as to narrow the gap between urban and rural areas. For instance, Moshi [82] took African countries as research objects and proved this conclusion. Therefore, we calculate the proportion of the added value of the secondary industry and the tertiary industry in GDP as the proxy variable of the industrial structure (ind).

4.3. Descriptive Statistics of Explanatory Variables

The data used in this study are mainly from China Urban Statistical Yearbook, China Rural Yearbook, and government official statistical website. To ensure the reliability of the data, we checked the data and deleted the cities with serious data deficiency. The final research sample was 281 prefecture level cities and cities above prefecture level cities in China from 2005 to 2020.

It is not difficult to see from Figure 2 that the correlation coefficient of some variables exceeds 0.75, indicating a strong positive correlation between the two variables. For this kind of variables, in the traditional econometric model, due to the linear hypothesis, the strong positive correlation has the problem of multicollinearity, which will lead to the inaccuracy of the regression results. Then, the true influence of an explanatory variable on the explained variable may be masked, while the ML algorithm used in this paper effectively overcomes this defect.

5. Determinants of IGG

In this section, we focus on exploring the determinants of IGG in China. We mainly use a series of ML algorithms for calculation; the process is stated in Section 5.1. And we reveal the determinants of IGG in China calculated by ML method in Section 5.2, followed by Section 5.3 which introduces robustness test to verify the robustness of the results of ML algorithm.

5.1. Machine Learning Algorithm Modeling

The process of determining the driving factors of IGGE by ML method includes data preprocessing, model construction, model prediction, and analysis. The specific steps are shown in Appendix. What we need to pay attention to is that it is quite necessary to set the hyperparameters based on the characteristics of each ML algorithm. Hyperparameters are parameters used to control the behavior of algorithms when building ML models. These parameters cannot be obtained from routine training. We need to assign values to the models before training them. In this paper, we use grid search technology to select the superparameters of the model. It builds a model for each arrangement of all given superparameter values specified in the grid and evaluates and selects the best model. Then, the explained variables and explanatory variables are regressed. The parameter settings of each model are shown in Table 3.

Table 3

Machine learning model parameter setting.

Parameter	Random forest	XGBoost	CatBoost	LightGBM
Training time (s)	4.803	5.13	4.22	3.89
Data segmentation	0.7	0.7	0.7	0.7
Minimum node splitting	2	—	—	—
Minimum leaf node	1	—	—	—
Maximum depth of tree	10	12	10	10
Maximum leaf nodes	50	—	—	—
Decision trees number	100	—	—	—
Base learner number	—	100	—	100
Learning rate	—	0.1	0.1	0.1
L2 regular term	—	1	1	1
Number of iterations	—	—	100	—
Sample sign sampling rate (%)	—	100	—	100
Tree feature sampling rate (%)	—	100	—	100
Data shuffle	Yes	Yes	Yes	Yes

5.2. Determinants of Inclusive Green Growth

We input the test set into each model for calculation. The comparison between the predicted results of ML and the actual results is shown in Figure 3. A significant advantage of ML algorithm is that it can automatically calculate the important percentage of the contribution of different drivers to IGGE. Meanwhile, these ML methods do not assume that there is a linear relationship between ten explanatory variables and IGGE. However, the results of different models are different, as shown in Figure 4. Among the determinants calculated by RF algorithm, the digitization contribution weight is the largest, more than 46.33%; XGBoost's results show that the digitization contributes the most, accounting for about 50%. Among the results of CatBoost algorithm, economic growth and digitization rank the top two, accounting for about 27.35% and 17.11%, respectively. Finally, in the results of LightGBM algorithm, the contributions of economic growth and city size are in the forefront, accounting for about 24.60% and 17.52%, respectively. Therefore, it is essential to determine the optimal model and obtain the results according to the optimal model. The performance evaluation of each model is shown in Table 4.

Figure 3

The comparison of ML predicted value and real value. (a) RFBoost. (b) XGBoost. (c) CatBoost. (d) LightGBM.

Figure 4

The contribution for determinants of IGGE. (a) The result from RF algorithm. (b) The result from XGBoost algorithm. (c) The result from CatBoost algorithm. (d) The result from LightGBM algorithm.

Table 4

Machine learning model performance measurement.

Algorithm	Dataset	RMSE	MAE	MAPE	R 2
RF	Training set	2.411	1.861	9.874	0.816
	Testing set	2.935	2.183	11.462	0.713
XGBoost	Training set	0.283	0.192	1.018	0.983
	Testing set	0.291	0.189	1.012	0.972
CatBoost	Training set	1.43	1.072	5.717	0.931
	Testing set	1.387	1.026	5.555	0.944
LightGBM	Training set	1.286	0.904	4.833	0.947
	Testing set	1.25	0.882	4.792	0.95

Table 4 reveals the performance of the different ML algorithms. From goodness of fit R2, we can see that the goodness of fit of XGBoost algorithm is 0.972, which is closest to 1 and the largest among all ML models. By comparing MAE and MAPE, we can see that the MAE value of test set and test set of XGBoost algorithm is 0.189, which is the smallest among all algorithms. For MAPE, XGBoost algorithm also has the smallest value, which shows that the ML model based on XGBoost algorithm is the best model for the study of IGGE determinants in this paper. Furthermore, the comparison between the prediction results of different algorithms presented in Figure 3 and the real value also verifies that the prediction value of XGBoost is closest to the real value. Therefore, next, we mainly analyze the operation results based on XGBoost model.

Based on the above selection process of the optimal ML model, we mainly focus on Figure 4(b), which is the calculation result of the ML model established based on the XGBoost algorithm.

This figure shows that, among the 10 explanatory variables we select for IGGE, the digitization contributes the most, accounting for about 50%. It shows that, for the sample cities in the statistical period, digitization is the main engine of urban IGGE, which is consistent with the previous research conclusions [68, 69]. On one aspect, the digital economy represented by IOT will bring about new business model with high added value and low pollution to the economy. On the other aspects, poor families and individuals may get more educational and training resources from digital platform, which will enhance their capacity to acquire higher payment in labor market, thus promoting the social equity.

The contribution of innovation on IGGE ranked second, accounting for about 15.18%. The possible reason is that innovation can promote the productivity of enterprises, especially SMEs, so as to give full play to personal potential and provide more employment opportunities. In addition, innovation leads to new technologies and inventions, so as to benefit more members of society. Additionally, the process of innovation will bring about more high-tech production and service, which may be friendly to the environment, as well as reducing the energy consuming and pollution.

Followed by economic growth, which contributes about 14.61%. On the one hand, its role cannot be underestimated. On the other hand, for developing countries such as China, compared with digitization and innovation, the contribution of economic growth to IGGE is slightly smaller, which may be related to the fact that IGGE is the coordinated development of economy, society, and environment. The digitization can solve the role of information asymmetry and reduce transaction costs, and innovation provides technical support for economic transformation and green development. Both are conducive to the coordination of economy, society, and environment.

Next is the urban size, which contributes about 8.82%. This also verifies that large cities may play an economic agglomeration effect and contribute to IGGE. It is worth noting that regional population growth may increase the pressure of CO2 emissions, while it may also promote innovation and income. Therefore, there is a complex nonlinear relationship between urban size and IGG.

Followed by the industrial structure and entrepreneurship, whose contribution are about 4.43%, respectively, industrialization can narrow the income gap and benefit the poor to a certain extent, but its role is limited.

Followed by foreign direct investment and the process of urbanization, which contribute 1.90% and 1.22%, respectively, there is the financial development, whose contribution is about 1.15%. The proportion of government intervention is the least, whose contribution is about 0.92%. It shows that, in current China, the government has not played its due role in promoting fair opportunities and narrowing the gap between the rich and the poor.

5.3. Robust Test

In order to further verify that the conclusion obtained by XGBoost algorithm is robust and reliable, we further introduce the traditional econometric model to regress and compare the calculation results with ML model. In the setting of regression model, the independent variable is an explanatory variable, and the dependent variable is IGGE which is measured by DEA model. Table 5 reports the regression results and R2 of the econometric model. Among them, the regression result of the first column is the regression result of controlling the urban individual and time fixed effects at the same time by ordinary least squares (OLS); the second column is the regression result that controls the time fixed effect; the third column is the regression result of controlling the fixed effect of urban individuals. The last column is the random effect model estimation.

Table 5

Regress results of econometric model.

	(1)	(2)	(3)	(4)
fd	IGGE	IGGE	IGGE	IGGE
	0.10255∗∗∗	−0.00268	−0.00510	−0.01047
house	(0.02058)	(0.03357)	(0.03307)	(0.03655)
	−0.66550∗	−0.10662	0.07403	0.18944
fdi	(0.35987)	(0.71390)	(0.71890)	(0.71512)
	0.36708∗∗∗	−0.19696	−0.16819	0.03019
inter	(0.12049)	(0.14908)	(0.12084)	(0.13818)
	6.41212∗∗∗	6.28739∗∗∗	2.38029∗∗∗	3.64882∗∗∗
gove	(0.72481)	(0.88386)	(0.74432)	(0.78199)
	−0.21927	0.11191	0.02886	0.00788
innovation	(0.18355)	(0.13443)	(0.13956)	(0.14145)
	0.01254	0.01155	0.03034	0.04056
lnpop	(0.01051)	(0.02187)	(0.02649)	(0.02939)
	−5.35827∗∗∗	−8.64793∗∗∗	−13.55774∗∗∗	−6.19101∗∗∗
enterp	(0.33908)	(3.30041)	(3.26264)	(0.96659)
	0.00860∗∗∗	0.00553∗∗∗	0.00299∗∗	0.00409∗∗
ind	(0.00145)	(0.00154)	(0.00147)	(0.00160)
	1.85708∗∗∗	2.18074∗∗∗	0.71279∗∗∗	1.15808∗∗∗
pgdp	(0.14347)	(0.27736)	(0.26190)	(0.28270)
	0.00005∗∗∗	0.00002∗∗∗	0.00000	0.00001∗∗∗
N	(0.00000)	(0.00001)	(0.00000)	(0.00000)
	4496.00000	4496.00000	4496.00000	4496.00000
R 2	0.52351	0.38342	0.47507	0.4621
City fixed	Yes	No	Yes	No
Year fixed	Yes	Yes	No	No

Note: , , and denote significance at the 1%, 5%, and 10% level, respectively. Robust standard errors in parentheses are clustered by city-level.

According to R2 of the four econometric models in Table 5, we can see that, under the model of controlling the fixed effect of urban individuals and time effect at the same time, R2 of the regress result is 0.5235, which is the best result. Therefore, we focus on comparing the results of this column with the calculation results of ML under the previous XGBoost algorithm to judge whether the results of ML model are robust.

It can be seen from Table 5 that, among all the drivers of IGGE, the variables with positive coefficient at the 1% significance level are digitization, industrial structure, financial development, foreign direct investment, entrepreneurship, and economic growth. It is suggested that these factors have the most significant positive driving effect on urban IGGE. However, the coefficient of urban size is negative, indicating that urban size (population size) significantly inhibits IGGE in Chinese cities. The coefficient of the process of urbanization is negative at the significance level of 10%, indicating that their importance in influencing IGGE in cities is lower than the previous factors. The coefficient of innovation and government intervention is positive, but not significant. The result shows that digitization is the most important engine of IGG. At this point, the econometric model is consistent with the XGBoost model, while there are obvious deviations in the contributions of other influencing factors. However, the econometric model of R2 is only 0.5235, which is far lower than the goodness of fit of ML algorithm 0.998. The possible reason for the difference is that the econometric model assumes the linear relationship between independent variables and dependent variables, while the ML model calculates the nonlinear relationship, so the latter is more consistent with the real situation and more robust and superior than the traditional method.

6. Conclusion and Policy Suggestion

6.1. Conclusion

As the world's largest emerging economy, China's increasing income inequality and environmental pollution are not conducive to the realization of the goal of sustainable development. Thus, it is urgent to change the growth model to IGG, as well as to identify the main engines of IGG to formulate relevant policies. In this context, the super efficiency DEA model is employed to measure the IGGE of 281 prefecture level cities in China from 2005 to 2020. Furthermore, we introduce a nest of ML algorithms to calculate the drivers of urban IGGE, which can overcome the problem of linear relationship assumption in traditional econometric models. Through the performance evaluation of each ML model, we recognize that the calculation result of XGBoost algorithm is most ideal.

The calculation results based on this algorithm reveal that, among all the drivers of urban IGG, digitization is the most critical, and its contribution weight reaches about 50% among all the drivers. Followed by innovation and economic growth, which explain 15.18% and 14.61% of IGG, respectively, the total contribution of other factors is about 20%. Furthermore, we have tested the robustness of the ML model by traditional econometric model, which still proves the importance of digitization for the realization of urban IGGE and the excellent performance of ML algorithm.

6.2. Policy Suggestions

Based on the importance ranking of determinant of IGGE in Chinese cities calculated by XGBoost algorithm and the results of heterogeneity analysis, we provide the following policy suggestions.

First of all, in order to give full play to the role of digitization in promoting urban IGGE, the government needs to focus on promoting the digital infrastructure construction in remote and rural areas and enhancing people's ability to use digital technology, so as to narrow China's digital divide and increase residents' income. And the government needs to actively guide traditional industries to embrace digital technology, accelerate industrial transformation, and improve total factor productivity of enterprises through digital dividends, so as to improve the inclusiveness and greening of the city.

Then, in the process of rapid urbanization, urban management authorities should not only pay attention to urban per capita GDP and other economic growth indicators, but also carefully plan the sources of driving urban economic growth, which means that the authorities should promote economic growth driven by innovation, including encouraging enterprises to invent new technologies, protecting personal inventions and patents, and spurring the transformation of the innovative achievements of scientific research institutions into the source of improving urban IGGE.

Finally, in view of the role of population agglomeration in IGGE, the policy of balanced development of urban population scale needs to be further improved, which means cities with sparse population need to develop industries based on local regional characteristics, carry out supporting infrastructure construction, and issue policies for dividend talents to flow into the region, so as to promote urban population agglomeration and enhance urban IGGE. In addition, we should encourage the cross-regional flow of talents in cities and share the human capital of excellent cities with less developed cities, so as to realize the trickle-down effect between cities.

6.3. Limitations of This Paper

Limited by the scope of our research, this paper inevitably has the following limitations.

Firstly, because there is no consistent view on the concept and measurement of IGG in the academic field, this study is only based on the existing literature to measure IGGE of Chinese cities. Future research needs to try a variety of different methods, build a more complex comprehensive index system to measure IGG, expand the range of data samples, such as research based on international IGG and IGG in the Asia Pacific region, and enrich academic contributions.

Secondly, due to the availability of data, this study only combs ten drivers of IGG according to the existing literature. Then, there may be some other potential factors in reality, but they are not taken into account. Therefore, future research will further explore the impact and contribution of other factors in order to find more drivers of IGG.

Finally, although the machine learning method has good accuracy and performance in measuring IGG of Chinese cities, the potential “black box” problem makes us unable to further explore the intermediary mechanism and spatial spillover effect of influence. Therefore, in the future, we will try to cooperate with the most cutting-edge machine learning methods and spatial econometric models to deeply explore the spatial effect, as well as the mechanism of these factors driving IGG.