Redressing labor factor mismatch in Chinese resource-based cities: Does digital economy matter?

• The effect of digital economy on labor factor mismatch in Chinese resource-based cities is explored. • The heterogeneity is supported in three aspects including regions, life cycles, and dominant resources. • One intermediary channel, that is, government intervention is proved valid. The digital economy serves as a key driver in reshaping economic development by altering the supply structure of market factors and influencing labor resource allocation. Based on panel data from 2011 to 2019 for resource-based prefecture-level cities in China, this study empirically examines the impact of the digital economy on labor factor mismatch using both static and dynamic panel models. The findings reveal that the digital economy significantly exacerbates labor factor mismatch, leading to decreased labor allocation efficiency. After replacing different measures of labor factor mismatch, the results remain robust. Heterogeneity analysis shows that the mismatch effect is stronger in central and western cities but statistically insignificant in eastern cities. Growth and mature cities, particularly regenerative cities, face greater mismatch due to accelerated labor force iteration and resource misallocation. However, the role of dominant resource types in shaping mismatch remains inconclusive. Finally, mechanism analysis identifies government intervention as a key channel, amplifying mismatch through automation-driven labor displacement. Industrial structure optimization and technological innovation, however, show weak mediating effects, reflecting structural rigidities in China's economy. Overall, these findings deepen the understanding of digital transformation's labor market consequences and inform policies for optimizing labor allocation.