Abstract In Cobb Douglas Production Function, there are three factors of production. This paper regards digital economy as a new factor of production to theoretically deduce the linkage mechanism between digital economy and regional economic growth.Taking the digital economy as the research object, the paper uses the panel co-integration test method to empirically analyze whether there is a linkage between the digital economy and the regional economy. Then, based the data from 2002 to 2017, we construct a State Space Model to analyze the dynamic changes between digital economy and regional economy. Through study, the following findings are deduced. Firstly, the growth of digital economy and regional economic fluctuate periodically, especially the fluctuations caused by the input of digital technology are great. Secondly, the integration of digital economy and industry is mainly achieved by increasing E-commerce revenue through online retail. It is beneficial for us to promote employment and regional economic development. The integration of digital economy and traditional industries is undergoing a process of transformation from acceptance to faultage. Therefore,the government needs to actively guide the transformation of traditional industries, overcome the problems of digital technology, and support the development of digital economy of small and medium-sized enterprises in policy and finance.
2021, Vol. 38 
