Spillovers across industries and regions in China’s regional economic diversification

Abstract

Industrial diversification depends on spillovers from related industries and nearby regions, yet their interaction remains largely unclear. We study economic diversification in China during the period 1990-2015 and present supportive evidence on both spillover channels. We add to the literature by showing that these two channels behave as substitutes when explaining new entries and exits, and by using acceleration campaigns of high-speed rail to address some endogeneity concerns with regional spillovers. Our findings confirm the role of relatedness and geographical distance in the diffusion of economic capabilities and support the idea that improvements in transportation can facilitate the diffusion of productive capabilities.

The spillover effect of neighboring port on regional industrial diversification and regional economic resilience

“…We find that the product space of ports exhibits distinctive feature that is different from the product space of ordinary regions and countries, mainly because of containerization. Consistent with the previous research (Hidalgo et al, 2007;Neffke et al, 2011;Boschma et al, 2013;Gao et al, 2021), a region neighboring the port is more likely to enter a new industry when it already has the related industries within their region. In addition, we find the evidence of cross-space spillover that more related products in ports increase the probability of success in neighboring regions' entering a new product.…”

“…This finding holds at regional level. Boschma et al (2013), Gao et al (2021), andJara-Figueroa et al (2018) found that regions in Spain, China, and Brazil are more likely to enter a new industry when they already have the related industries. These findings told us that existing related industries within regions are a source of industrial diversification through inter-industry spillovers.…”

“…Bahar et al (2014) show that countries are more likely to successfully enter a new product when they have neighboring countries that already export that product. At regional level, Gao et al (2021) find that Chinese regions successfully diversify to a new industry when the region has neighboring regions that already have that industry.…”

“…At the same time, examination of cross-space spillover can mitigate the limitation. Although Bahar et al (2014) and Gao et al (2021) examine the inter-regional spillover in industrial diversification, they build one general product and industry space, respectively, and trace the product and industry trajectories on the same space, focusing on their product/industry spillover that happen only product/industry space. However, a new product/industry can emerge in a region through the spillover across different dimensions, such as between technology space and product/industry space, or skill space and product/industry space.…”

Substantial but heterogeneous impacts of high-speed rail on talent flow in China

“…HSR helps people overcome the distance barrier so that labors have more opportunities to pursue high levels of salaries and living environment (Fan et al, 2019;Jiao et al, 2017;Yang et al, 2018;Zhou et al, 2018). By facilitating passenger mobility for entertainment and business, HSR accelerates the flow of knowledge, experience, information, and other economic factors (Duan et al, 2020;Wang et al, 2019a), and thus it intensifies economic activities between cities, such as enterprise investment (Lin et al, 2019), regional cooperation (Wu et al, 2013), innovation output (Dong et al, 2020), technological communication (Lin et al, 2021b), and market transaction (Campa et al, 2016;Cascetta et al, 2011;Pagliara et al, 2017), eventually leading to better allocation of economic factors and faster growth of regional economy (Chen and Hall, 2011;Cheng et al, 2015;Diao, 2018;Gao et al, 2021;Long et al, 2018;Pan et al, 2020). The reduction in travel time also boosts the development of transportation, tourism, retail trade, and hotel (Dong et al, 2020;Gao et al, 2019b;Lin, 2017).…”