Abstract: China has been experimenting with the transition from an investment-driven economic development mode to a consumption-driven mode. With the digital reconstruction of production mode, it is practically imperative to address the challenging question of how to explore the “digital dividend” and improve residents’ consumption. Based on this, we aim to explore the impact of digital economy development on residents’ consumption and its internal mechanism. Specifically, we use the observation of the 2088 city-year panels formed by 232 cities from 2011 to 2019, and conduct an empirical research by building a panel fixed effect model and a spatial econometric model. The results show that: (1) the digital economy development can boost residents’ consumption through the “income effect” and the “innovation effect”, which is still true after eliminating endogenous problems; (2) the digital economy development has a significant impact on the residents’ consumption in neighboring areas, namely, a positive spatial spillover effect; (3) the digital economy has a heterogeneous impact on residents’ consumption. For highly-developed regions, the digital economy development has a more significant effect on consumption promotion. This study contributes to the in-depth understanding of the important role of digital economy development and provides an important theoretical basis and policy reference for the digital transformation to release the residents’ consumption potential.

Key words: digital economy development, residents’ consumption, residents’ income, regional innovation level, spatial panel model