Suppression or promotion: research on the impact of industrial structure upgrading on urban economic resilience

Enhancing urban economic resilience is crucial for mitigating risks and shocks. Globalization has increased economic interdependence, yet some developing countries face challenges in building resilient economic systems. This study focuses on industrial structure upgrading, a key driver of urban economic transformation, examining its impact on urban economic resilience within the context of globalization. The research explores the potential nonlinear relationship between these factors and investigates regional heterogeneity in their effects. The study aims to provide insights for policymakers to develop targeted strategies promoting high-quality urban economic development, particularly in light of the global financial crisis of 2008 and the COVID-19 pandemic, which highlighted the significant differences in economic resilience across countries. China’s relative resilience compared to nations like the US and Japan during these crises presents a valuable case study, further highlighting the importance of understanding the mechanisms behind robust economic growth.

Existing research on urban economic resilience has focused on measurement methods, influencing factors, and the role of industries. While measurement methods vary, fiscal gaps, geographical location, and resource endowments are frequently cited as constraints. Urbanization, technological innovation, and industrial agglomeration are seen as key drivers. Regarding industries, research has examined the micro-level impact of individual sectors and the macro-level effect of industrial structure upgrading. Although studies exist on the relationship between globalization and industrial structure upgrading, and between industrial structure upgrading and economic resilience, few have explored the combined effects of all three. Existing studies on the relationship between globalization and urban economic resilience have presented varied conclusions, suggesting a dynamic and potentially non-linear relationship. The current study aims to fill this gap by analyzing the nonlinear interaction among globalization, industrial structure upgrading (both rationalization and advancement), and urban economic resilience.

This study utilizes panel data from 267 prefecture-level cities and above in China (excluding Hong Kong, Macau, Taiwan, Xinjiang, and Tibet) from 2008 to 2021. Urban economic resilience is measured using a composite indicator combining GDP and the absolute change in GDP growth rate. Industrial structure rationalization (RIS) is calculated using a formula that considers the relationship between industrial output, labor input, and industrial sector. Industrial structure advancement (AIS) is measured as the ratio of tertiary industry added value to secondary industry added value. Globalization (GL) is represented by per capita foreign direct investment. Control variables include industrial agglomeration, fiscal gap, technology investment, population density, and infrastructure level. A threshold panel model is employed, with globalization serving as the threshold variable. The study uses a dual threshold model, identified through F-tests and bootstrap methods to determine consistent threshold values. Hausman tests determine the use of fixed effects models. Regional heterogeneity is analyzed by dividing the cities into eastern, central, northeastern, and western regions. Robustness checks are conducted by removing extreme values, controlling for time and individual interaction effects, and including additional control variables (market size, financial development level, and cultural soft power).

The study finds a significant nonlinear relationship between industrial structure upgrading and urban economic resilience, exhibiting a double threshold effect based on the globalization level. At lower levels of globalization, industrial structure rationalization positively impacts resilience, while industrial structure advancement shows no significant impact. As globalization increases beyond the first threshold, both rationalization and advancement positively affect resilience. This positive effect is further amplified beyond the second threshold. Robustness tests using various methods confirm the consistency of these findings. Regional heterogeneity analysis reveals an inverted U-shaped relationship between industrial structure upgrading and resilience in the eastern and central regions. The northeastern region shows a single threshold effect, with globalization only affecting resilience at higher levels. The western region displays no threshold effect. Table 4 details the regression results and robustness tests, while Table 5 and Table 6 present threshold effects and regression results for each region. Figure 2 graphically displays the likelihood ratio function for the dual threshold values of globalization.

The findings support the hypothesis that the impact of industrial structure upgrading on urban economic resilience is nonlinear and significantly influenced by the level of globalization. The inverted U-shaped relationship in the eastern and central regions suggests that while initial globalization fosters resilience through industrial upgrading, excessive globalization may eventually lead to negative impacts. Regional disparities highlight the importance of context-specific policies. The results contribute to the literature by demonstrating the nonlinear interaction between industrial structure upgrading, globalization, and urban economic resilience, challenging previous linear perspectives. The study's robust results across different methodological approaches enhance the reliability and generalizability of the findings.

This study demonstrates the significant nonlinear impact of industrial structure upgrading on urban economic resilience, moderated by globalization. Policy recommendations include accelerating industrial transformation, increasing openness and innovation, and implementing region-specific strategies tailored to different levels of globalization. Future research could explore more nuanced indicators for industrial structure upgrading, incorporate dynamic aspects of resilience, and extend the analysis to a broader range of countries.

The study's limitations include the use of a specific composite indicator for urban economic resilience, potential shortcomings in the measurement of industrial structure advancement and rationalization, and missing data in certain regions, particularly the western region. Future research should address these limitations by exploring alternative resilience metrics, refining the measurement of industrial structure upgrading, and expanding the geographical scope to encompass a more comprehensive dataset.