Assessing the environmental impact of digital and manufacturing industry co-agglomeration: Dual perspectives of geographical and virtual agglomeration

The coordinated development and agglomeration of the digital and manufacturing sectors have reached widespread consensus. However, its potential environmental impacts remain underexplored. To bridge this gap, utilizing the panel data of China's prefecture-level cities from 2006 to 2021, this paper analyzes the spatiotemporal evolution of digital and manufacturing industry co-agglomeration (DMCA), and then investigates the environmental impact and mechanisms of DMCA, using urban air pollution as a case study. It delves into the mechanism and heterogeneity from dual perspectives of geographical and virtual agglomeration. Key findings include: First, DMCA level in China has steadily increased, with higher concentrations in the Eastern and Central regions, especially in core urban clusters and economic belts. Second, DMCA significantly mitigates urban air pollution by leveraging its positive environmental externality, a result validated through robustness and endogeneity tests. Meanwhile, the impacts exhibit asymmetry, spatial heterogeneity, and nonlinear effects. Third, industrial upgrading, technological innovation, energy transition and factor allocation are verified as primary mediating channels through which DMCA mitigates urban air pollution, and environmental regulation is also verified as a positive moderating effect. Last but not the least, the differentiated of digital and manufacturing virtual agglomeration on urban air pollution are further investigated, particularly in the mechanisms and differentiated pathways of production intensification and lifestyle digitalization. This study enriches the theoretical framework concerning on industrial co-agglomeration, providing policymakers with critical insights to enhance the synergistic effect and positive environmental externalities of DMCA.