Productive Service Agglomeration, Human Capital Level, and Urban Economic Performance

Abstract

This study aims to investigate the impact of productive service industry agglomeration on the economic performance of Chinese cities. The study analyzes data from 285 prefecture-level cities over a 16-year period (2003–2019) and develops a comprehensive urban economic index evaluation system based on three dimensions: social, economic, and resource and environmental benefits. The empirical analysis reveals that high-end productive service industry agglomeration has a significant positive relationship with urban economic performance (effect size of 0.012), whereas low-end productive service industry agglomeration does not. The study also finds that the impact of productive service industry agglomeration on economic performance varies across different regions and cities. Specifically, productive service industry agglomeration has a significant positive impact on the economic performance of cities in the eastern, central, northeastern, and western regions, with the impact being twice as much in the western region compared to the eastern region. Moreover, the effect of productive service industry agglomeration on the economic performance of non-resource-based cities is almost one-third more than that of resource-based cities. The study further reveals that human capital plays a mediating role in the relationship between productive service industry agglomeration and urban economic performance. Based on these findings, the study suggests that Chinese cities, particularly non-resource-based cities and those in the central and western regions, should focus on supporting high-end productive service industry agglomeration, improve the quality of productive service industry agglomeration, strengthen the matching between the accumulation of human capital and the development of productive service industry agglomeration, and tailor their strategies to promote the development of productive service industry agglomeration effectively to improve their economic performance.