The Impact of City Ranking on Industry Shifting: An Empirical Study

Abstract

This paper focuses on whether city honor competition has led to a sectoral shift. The research argues that cities’ actions in pursuing honor have led to their changing from the manufacturing sector to the service sector. This paper attempts to construct a theory from city competition to sector shift. The research methods used are year-by-year propensity score matching and the difference-in-difference method. The results of the regressions prove that a city honor competition leads to a shift from the manufacturing sector to the service sector. The true value of this effect is approximately between 2.3274 and 3.0393, showing that the city honor competition promotes a sectoral shift. The trend of the city’s economy towards the service sector is evident in the competition. The robustness test proves that the model satisfies the matching equilibrium assumption. The placebo test proves that other unobserved factors do not affect the policy. The heterogeneity test finds that the larger the city size, the stronger the effect of city honors on the sector.