Smart city construction and quality upgrading of export products: Evidence from China

Abstract

Smart cities, as an advanced form of urban development in the digital age, are likely to profoundly affect the operations of local businesses. This paper analyzes the impact of smart city construction on the quality of firms’ export products by exploiting a quasi-natural experiment based on a smart city pilot policy in China and employing the staggered difference-in-differences (DID) method. Our empirical results reveal that the implementation of the policy significantly improves the export product quality of local firms, and this finding remains quite robust after a series of sensitivity tests. Mechanism analysis shows that the improvement of innovation efficiency and the reduction of transaction costs are two effective channels through which smart city construction enhances export product quality. Heterogeneity analysis reveals that the policy effects are more prominent in high-tech industries, cities with high administrative levels, the eastern and central regions, non-state-owned firms, and general trade firms, which enjoy greater policy dividends than their counterparts.