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.

Illuminating the World Cup effect: Night lights evidence from South Africa

“…Additionally, we have to exclude potential spillovers from treated regions to nontreated ones as these would invalidate the identifying assumptions of SCM. We do this, as is standard in the regional policy evaluation literature (Alder, Shao, & Zilibotti, ; Aragon & Rud, ; S. O. Becker, Egger, & von Ehrlich, ; Dettmann, Brachert, & Titze, ), by considering spillovers to be a function of proximity to the treated locations and, hence, exclude regions neighboring World Cup venues (and Lesotho) from the donor pool. Under the hypothesis of no indirect effects on nontreated regions, using a donor pool stemming from the same country as the treated unit should be a first best solution, since such a donor pool offers better comparability than a donor pool from any other country .…”

Broadband Internet, Firm Performance, and Worker Welfare: Evidence and Mechanism

“…This study is also related to studies that examine the determinants of firm's performance in China. Previous studies have highlighted reforms such as trade liberalization and WTO accession (Brandt et al ; Khandelwal, Schott, and Wei ; Lu and Yu ; Yu ); flattening government (Li, Lu, and Wang ); place‐based industrial policies (Alder, Shao, and Zilibotti ; Lu et al ; Wang ). The results from this study provide novel evidence that the implementation of high‐speed internet can, to some extent, contribute to improvements in firm's productivity and worker's wage during the past decades.…”

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