The impact of smart city construction on labour distortions from the perspective of labour mobility: evidence from China

Migration decisions and labour demand are influenced by smart city construction (SCC). However, the impacts of SCC on the labour market remain black-boxed. This paper investigates the impacts of SCC on labour market distortions through an examination of a large-scale smart city pilot policy in China. Utilising urban panel data in China spanning 2008-2019, we employ a multi-period difference-in-difference model to examine the labour factor allocation effects of SCC. Our findings reveal that SCC effectively mitigates labour wage distortion (LWD) but has an adverse effect on labour misallocation (LMA). labour mobility is a critical mechanism through which SCC alleviates labour wage distortion (LWD) but exacerbates labour misallocation (LMA). Furthermore, the results of heterogeneity analysis indicate that strongly connected and high human capital cities not only benefit from SCC in alleviating LWD but also avoid its negative effects on LMA. Conversely, SCC neither improves LWD nor alleviates LMA in weakly connected and low human capital cities. These findings imply that urban smart construction causes multiple impacts on the labour factor market, which is conducive to factor market guidance policies that can coordinate with SCC.