Impact of Innovative City Pilot Policy on Industrial Structure Upgrading in China

Abstract

Urban innovation has been highly regarded as a modern urban model that drives sustainable urban development by synthesizing knowledge innovation and technological innovation in industrial processes. As such, numerous studies have emerged to investigate the impact of the innovative city pilot policy (ICP), yet the impact of the ICP on industrial structure upgrading has not been explicitly studied. To address the research gap, this study utilizes the ICP in China as a quasi-natural experiment and investigates the impact of the ICP on industrial structure upgrading in Chinese cities. We apply a DID model estimation on a panel dataset of 284 Chinese prefecture-level cities from 2007 to 2019. The results indicate that the innovative city pilot policy greatly helps to upgrade the industrial structure in pilot cities, with the upgrading outcome particularly evident in large and non-natural resource-based cities. Mechanism analyses further reveal three channels via which the ICP promotes industrial structure upgrading, specifically by improving innovation capacity, boosting labor clustering, and lowering pollutant emissions. The results of this study carry significant policy implications for China in building a sustainable and modernized economic system and for other emerging nations in seeking economic transformation and industrial structure upgrading.