Economic reforms and industrial policy in a panel of Chinese cities

Abstract

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. AbstractWe study the e¤ect 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 di¤erence-in-di¤erence estimation exploits the variation in the establishment of SEZ across time and space. We …nd that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20%. This …nding is con…rmed with alternative speci…cations 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 e¤ect on physical capital accumulation, although SEZ also have a positive e¤ect on total factor productivity and human capital investments. We also investigate whether there are spillover e¤ects of SEZ on neighboring regions or cities further away. We …nd positive and often signi…cant spillover e¤ects.JEL Codes. H72, L52, O25, O38, O53, P21, R11.

Government-subsidized R&D and firm innovation: Evidence from China

“…However, empirical analysis on the spillover effects of high-tech zones or SEZs in China is limited, and results are mixed. Several studies find that the establishment and development of SEZs significantly and positively affects foreign direct investment, physical capital, exports, or outputs of foreign firms at the city or province level (Cheng and Kwan, 2000;Wang, 2013;Alder et al, 2013). However, Hu (2007) did not obtain evidence of the geographical externalities of high-tech parks.…”

Does Administrative Approval Impede Low-Quality Innovation? Evidence from Chinese Manufacturing Firms

“…The setting can test two questions: First, whether there is a significant difference in low-quality innovation between the treatment group and the control group before the AAC establishment. Second, whether the firms in cities that establish the AAC are with more low-quality innovation [49,50].…”

A provincial view of global imbalances: regional capital flows in China

“…Alder et al, 2013), special economic zones (SEZs) have played a pivotal role in China's development over the last decades. In our sample, FDI (F DI) seems to be significantly associated with an increasing contribution to international interest rates variability and a decreasing contribution to net output variability.…”