Spatial Effects of Service Industry’s Heterogeneous Agglomeration on Industrial Structure Optimization: Evidence from China

Abstract

Elucidating the impacts of service industry’s agglomeration on the optimization of industrial structures holds paramount significance in advancing urban economic growth and fostering the coordinated and sustainable development of city economies. This study leverages panel data encompassing 251 prefecture-level cities spanning from 2003 to 2019, employing a spatial Dubin model to scrutinize the influence of distinct types of service industry agglomeration on industrial structure optimization. The results show that specialized agglomeration within the service sector significantly inhibits the rationalization of industrial structures and their underlying fundamentals. Conversely, heightened levels of agglomeration in diversified service industries facilitate the rationalization of industrial structure, predominantly driven by regional spatial spillover effects. Further analysis reveals heterogeneity in service industry agglomeration across cities of varying sizes concerning industrial structure optimization, notably accentuating underutilized spatial spillover effects in smaller cities. In light of these insights, this paper advocates for cities to capitalize on the agglomeration and spillover effects between the service industry and other sectors, strategically selecting optimal service industry agglomeration modes to propel industrial structure optimization.