Journal Article

Economic reforms and industrial policy in a panel of Chinese cities

Alder, Simon, Shao, Lin, Zilibotti, Fabrizio

2016

Overview

We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese (prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20%. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.

• Publisher: Springer Science + Business Media,Springer US,Springer Nature B.V
• Subject: Accumulation / Capital formation / Capital investments / Cities / Development policy / Economic activity / Economic development / Economic Growth / Economic models / Economic reform / Economic statistics / Economic theory / Economics / Economics and Finance / Enterprise zones / GDP / Gross Domestic Product / Human capital / Industrial policy / International Economics / Investments / Liberalization / Macroeconomics/Monetary Economics//Financial Economics / Per capita / Political economy / Productivity / Provinces / Spillover effect / Studies