Does servitization of industrial structure adversely affect the quality of economic development? Evidence from China

Abstract

China is shifting from focusing on speed of economic development to quality development. As the proportion of service industry increases, the impact of servitization of industrial structure on high-quality development urgently needs to be clarified. This paper for the first time uses the panel data of 280 prefecture-level cities ranging from 2003 to 2019 in China, applies the dynamic panel Generalized Method of Moment (GMM) estimation method, employs labor productivity, average wage, and environmental pollution as intermediary variables, and analyzes how servitization of industrial structure affects the quality of economic development. The results show that there is a U-shaped effect for servitization of industrial structure on quality of economic development. The higher the initial level of servitization of industrial structure, the weaker the negative effect for servitization of industrial structure on the quality of economic development. When the initial level of the former is high enough, it can promote the latter. Moreover, the effects differ by region. Furthermore, negative effect of the service-oriented trend of industrial structure on economic development quality is weakened by improving the overall labor productivity and reducing environmental pollution, while it is strengthened by reducing the average wage level. As such, we propose that it is necessary to further promote the rationalization of the industrial structure, promote the optimization of the development of the industrial structure, and to promote the effective allocation of resources.