A dynamic perspective on deindustrialization and growth: mechanisms and heterogeneous impacts in China

With the backdrop of global industrial chain restructuring and domestic economic transformation, the heterogeneous impact of deindustrialization on economic growth has become an important issue. This paper innovatively constructs a dynamic deindustrialization index, and uses a fixed-effects model and system GMM method to systematically test the impact mechanism and regional differences of deindustrialization on urban economic growth, based on panel data from 277 prefecture-level cities in China from 2011 to 2019. The study found that the degree of deindustrialization is significantly negatively correlated with economic growth, and this conclusion holds under multiple robustness tests. The mechanism analysis shows that deindustrialization hinders economic growth through three channels: suppressing labor productivity, reducing the scale of the industrial economy, and blocking technological innovation. The inhibitory effect of technological innovation is particularly prominent in areas with weak industrialization foundations. Heterogeneous analysis reveals that the Northeast region and cities that deindustrialized prematurely suffered the most significant impact, far exceeding other regions. Further research found that premature deindustrialization may lead to a mismatch of production factors and rupture of the industrial chain, exacerbating regional development imbalances.