Abstract: Based on panel data of Chinese cities from 2007 to 2018, this paper estimates the development level of digital economy in each city through principal component analysis, and explores the impact of digital economy on urban employment and its mechanism. The study found that the development of the digital economy can significantly increase the size of employment in cities, and this conclusion held true after a series of robustness tests. Furthermore, this paper explores the specific mechanism of how digital economy promotes urban employment, and finds that digital economy not only promotes urban economic scale and capital deepening, but also promotes entrepreneurial activity and employment quality optimization of the city. Digital economy has played a role in promoting urban employment growth through two mechanisms of "deepening effect" and "broadening effect" and four channels of "enhancing entrepreneurial activity".

Key words: digital economy, stable employment, deepening effect, wide effect