Considering the important role the demand from manufacturing has played in the development of producer services, this paper analyzes the influence mechanism of manufacturing demand on producer services efficiency through two channels, which are the scale effect and innovation incentives. Meanwhile, the paper also evaluates the moderating effect of economic development level on the relationship between manufacturing demand and producer services efficiency. Based on the panel data of China’s manufacturing industry and producer services from 1995 to 2014, the empirical result shows that: (1) the demand from manufacturing was helpful to improve producer services efficiency, and compared with the labor-intensive manufacturing, the demand from capital-intensive manufacturing played a more important role in improving producer services efficiency; (2) at different stages of economic development, the promoting effect of manufacturing demand on producer
services efficiency showed a nonlinear threshold effect rather than a simple linear effect, namely after crossing a certain threshold of economic development level, the promoting effect would be more significant. More specifically the threshold level faced by capital-intensive manufacturing industry was higher than that faced by labor-intensive manufacturing industry. These findings may be helpful for governments to make industrial development strategy.
Keywords: manufacturing demand, producer services efficiency, economic development level, threshold effect
China Finance and Economic Review
Volume 7 Number 4 Winter 2018.P48