Service sector agglomeration and industrial structure optimisation: evidence from China's resource-based cities

Abstract

This paper employs the system generalised method of moments approach and panel data of Chinese resource-based cities at the prefecture level for the period of 2003–2019 to investigate the effects of two types of service sector agglomeration on industrial structure dynamics. The results show that an increase in ‘specialised agglomeration’ of services would inhibit industrial structure rationalisation and upgrading. However, an increase in ‘diversified’ agglomeration of services promotes industrial structure upgrading though it also inhibits industrial structure rationalisation. Furthermore, it is also found that an increase in diversified agglomeration would inhibit industrial structure rationalisation in eastern cities and industrial structure upgrading in western cities but promote industrial structure rationalisation and upgrading in central cities. These insights suggest the importance of fostering the appropriate form of service sector agglomeration within resource-based cities. Leveraging the synergistic linkages between the service sector and other industries could enhance the industrial structure optimisation of resource-based urban economies.