Does the National AI Pilot Zone Policy Promote Industrial Upgrading? Empirical Evidence From Chinese Cities

ABSTRACT

As a transformative general‐purpose technology, artificial intelligence (AI) is increasingly becoming a core driving force for promoting industrial transformation and upgrading. However, there is still insufficient empirical research on whether AI‐driven policy interventions can effectively accelerate regional industrial upgrading. This study explores the causal effects of China's national AI pilot zone policy by analysing panel data from 287 cities between 2013 and 2023, combined with a quasi‐natural experiment based on the difference‐in‐differences method. The results show that AI pilot zones significantly improve the level of industrial upgrading, confirming the effectiveness of regional policy tools in promoting technological transformation. Mechanism analysis suggests that AI pilot zone policies may promote industrial upgrading through talent agglomeration and innovation adjustment. Talent agglomeration provides a positive channel, while innovation activity may involve short‐term adjustment costs before its structural benefits are fully realized. In addition, the impact of the policy is regulated by the industrial ecological environment in a non‐linear manner. Heterogeneity analysis shows that policy dividends are mainly concentrated in eastern cities, while central and western regions have a lower response due to their weaker absorption capacity. Moreover, the policy works best in regions with a medium‐level ecosystem. These findings deepen the understanding of the effectiveness of AI policies and provide practical insights for formulating context‐specific industrial upgrading strategies and optimizing ecosystems to promote AI development.