Place‐based policies, firm productivity, and displacement effects: Evidence from Shenzhen, China

Abstract

Developing and transitional countries devote considerable funds to selected areas to stimulate local growth and firm productivity. We examine the impact of place‐based interventions due to the opening of science parks in Shenzhen, China, on firm productivity and factor use. Our identification strategy, exploiting spatial and temporal differencing in firm‐level data, addresses the issues that (a) the selection of science park locations is not random and (b) high‐productivity firms sort themselves into science parks. Firm productivity is approximately 15–25% higher due to the science park policy. The policy also increases local wages and leads to distortions due to job displacement.

The effect of science and technology parks on tenant firms: a literature review

“…In relation to employment, Löfsten and Lindelöf (2001, 2003 find that on-park firms show substantially higher rates of job creation than firms in the off-park sample. This result is confirmed by Colombo and Delmastro (2002), Díez-Vial and Fernández-Olmos (2017a) 7 and Koster et al (2019). However , Ferguson, (2004) argues that STPs can have positive effects on the employment growth of tenant firms only up to a certain point, while on-park location is a limiting factor for firms entering a development period characterised by high-growth.…”

“…Few studies, mostly recently (e.g. Hasan et al, 2020;Koster et al, 2019;Liberati et al, 2016;Ramírez-Alesón & Fernández-Olmos, 2018;Siegel et al, 2003a;Squicciarini, 2008;Ubeda et al, 2019;Vásquez-Urriago et al, 2014, 2016aXue & Zhao, 2021;Yang, Hsu, et al, 2009;Yang, Motohashi, et al, 2009), apply econometric methods to address the selection bias problem.…”

“…In relation to productivity, Hu (2007) finds that Chinese STPs do not help firms to achieve higher labour productivity growth, and Zhang and Sonobe (2011) suggest that this result can be explained by congestion effects in STPs that likely outweigh the positive effects of agglomeration economies in relation to labour productivity. The recent papers by Hasan et al (2020) and Koster et al (2019) find a positive effect of STPs on global firm productivity. Koster et al (2019) also show employees of on-park firms have higher wages.…”

“…The recent papers by Hasan et al (2020) and Koster et al (2019) find a positive effect of STPs on global firm productivity. Koster et al (2019) also show employees of on-park firms have higher wages.…”

Economic and Environmental Changes in Shenzhen—A Technology Hub in Southern China

“…It is the great passion, diligence, initiative and creativity of entrepreneurs [69] that help Shenzhen edge Hong Kong and many coastal cities in China as the technological and innovation hub. Additionally, the Government implements favorable entrepreneurial policies such as the construction of science parks and support of co-working spaces [69,70].…”