How does digital transformation relieve the employment pressure in China? Empirical evidence from the national smart city pilot policy

Abstract

Abstract The impact of digital transformation on employment has been increasingly noticed by the academic community, while the internal mechanism still remains as a black box, especially in terms of specific pilot policy, such as the national smart city pilots policy in China. Based on the city-level and firm-level panel data, we investigate the impact of China’s national smart city pilot on the employment pressure of urban job seekers using difference-in-differences model. The results show that the national smart city pilots significantly reduces the employment pressure in the pilot cities. In addition, by bringing configuration optimization and technological upgrading, smart city pilots affect firm selection at the micro level, generating siphoning effects, factor substitution effects, and efficiency gains, and further affect the macro economy by promoting urban economic agglomeration, industrial structure transformation, and regional innovation thereby affecting employment pressure. Furthermore, the reduction effect of China’s national smart city pilot on employment pressure are heterogeneous in terms of cities, firms, and workers’ education levels. Finally, conclusions and policy implementations are provided to highlight the theoretical and practical values.