On economic agglomeration and carbon productivity in Chinese cities: a spatial econometric analysis

Economic agglomeration has played a key function in China's economic transformation. Meanwhile, structural adjustment and external pressure to reduce carbon emission necessitate a deeper investigation into its relationship with carbon productivity. This paper measures economic agglomeration and carbon productivity of 281 cities in China in 2003-2017. With the purpose of exploring the spatial effect of economic agglomeration on carbon productivity, a spatial Durbin model is constructed. In addition, the mediation effect model is also adopted for examining the transmission mechanism of economic scale and technological progress on economic agglomeration as well as carbon productivity. A heterogeneity test is also carried out to uncover the varying effects of economic agglomeration on carbon productivity. The empirical results suggest that economic agglomeration raises carbon productivity not only in the local cities but also in the neighbouring ones. The impact of economic agglomeration on carbon productivity becomes more potent as the level of economic agglomeration increases. For cities with low level of economic agglomeration, the effect is mainly achieved through the expansion of economic scale, but for cities with high level of economic agglomeration, the effect is mainly achieved through technological progress. Therefore, we suggest encouraging carbon productivity improvement through technology effect in cities with high economic agglomeration level, while enhancing carbon productivity through scale effect in cities with low economic agglomeration level.