Measurement and prediction of the development level of China’s digital economy

Abstract

Abstract This paper investigates the development level of the digital economy of China. Firstly, an indicator system of the digital economy is constructed from five aspects: digital infrastructure construction, digitalization level of society, growth of the economy promoted by Information and Communication Technologies (ICT), development level of digital economy industries, and capitalization level of digital economy enterprises. Secondly, we use Kullback-Leibler (K-L) divergence and time-difference correlation coefficient to classify the indicators, and construct a prosperity index. Thirdly, this paper establishes Grey-Markov model combining grey system and Markov chain, further uses this model to predict the development level of digital economy. The empirical analysis shows the Grey-Markov model is superior to grey prediction model in capturing random fluctuations, and Monte Carlo simulation indicates that this model has good robustness. It finds that the gradual deceleration of development will make digital economy close to the relatively stagnant period, although its development level remains stable in the next two years. This research will provide theoretical basis of decisions for government departments, and offer strategic support of the digital transformation for enterprises.