Abstract: Production factors market distortion is the key factor restricting the upgrading of China′s industrial structure. This paper takes labor market distortion and capital market distortion as the starting point to explore the mechanism of its impact on the imbalance of China′s industrial structure, empirically tests the impact of production factors market distortion on the imbalance of industrial structure, and analyzes the “gap” of the imbalance of industrial structure caused by labor market distortion and capital market distortion.The results show that: from 2001 to 2017, there are different degrees of distortions in the labor market and capital market of China′s provinces; in the estimation results, the positive effects of labor market distortion and capital market distortion on the imbalance of industrial structure show that both of them significantly aggravate the imbalance of China′s industrial structure;the counterfactual test results show that labor market distortion and capital market distortion deepen the imbalance degree of industrial structure, and the degree of capital market distortion aggravating the imbalance of industrial structure is higher than that of labor market distortion,but in areas with surplus labor force, the government′s guidance of labor force can help to improve the imbalance of industrial structure to a certain extent.Therefore, deepening the household registration reform, promoting the marketization of production factors, and giving full play to the decisive role of the market in the allocation of production factors are of great significance to the balanced development of industrial structure and the protection of industrial safety.

Key words: production factors market distortion;imbalance of industrial structure, Spatial Durbin Model, counterfactual test