Impact of Industrial Agglomeration on the Upgrading of China’s Automobile Industry: The Threshold Effect of Human Capital and Moderating Effect of Government

Tingting Sun and Muhammad Asraf bin Abdullah ()
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Tingting Sun: Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Malaysia
Muhammad Asraf bin Abdullah: Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Malaysia

Sustainability, 2025, vol. 17, issue 7, 1-25

Abstract: This study investigates the impact of industrial agglomeration on the upgrading of China’s automobile industry (UCAI) using panel data from 28 Chinese provinces spanning 2000 to 2020. The automobile industry is vital to China’s manufacturing and service sectors, with its upgrading capable of driving national economic growth and contributing to sustainable development goals. We employ the Malmquist productivity index based on the Data Envelopment Analysis (DEA) method, implemented through DEAP 2.1 software, to assess the UCAI. System Generalized Method of Moments (GMM) analysis, conducted using Stata 17 software, was used to examine the impact of industrial agglomeration on this process, while also exploring the threshold effect of human capital and the moderating effect of government. The results indicate that industrial agglomeration significantly enhances the upgrading of the automobile industry; however, human capital acts as a critical threshold. Below this threshold, agglomeration does not have a significant impact on the upgrading of the automobile industry, while exceeding it allows for significant positive effects. Additionally, government has a moderating effect in facilitating this process by implementing policies that support innovation and sustainable practices. Based on these findings, this paper presents several policy implications aimed at further promoting the UCAI and advancing sustainable development in the sector.

Keywords: industrial agglomeration; upgrading; human capital; government (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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