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Economic Reforms and Industrial Policy in a Panel of Chinese Cities

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  • Alder, Simon
  • Shao, Lin
  • Zilibotti, Fabrizio

Abstract

We estimate the effect on economic development of China's industrial policy, in particular, the establishment of Special Economic Zones (SEZ). We use data from a panel of 276 Chinese cities and prefectures from 1988 to 2010. Our difference-in-difference estimator 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%, but not with a permanently steeper growth path. 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. Decomposing the effect of SEZ on GDP into different channels shows that this worked mainly through the accumulation of physical capital, although there is some evidence of increasing productivity and human capital investments. Using light intensity as an alternative measure for economic activity confirms the positive effects of SEZ.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9748.

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Date of creation: Nov 2013
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Handle: RePEc:cpr:ceprdp:9748

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Keywords: China; difference-in-difference; economic growth; economic reforms; industrial policy; investments; satellite light; special economic zones; total factor productivity;

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  1. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
  2. Shang-Jin Wei, 1993. "Open Door Policy and China's Rapid Growth: Evidence from City-level Data," NBER Working Papers 4602, National Bureau of Economic Research, Inc.
  3. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, December.
  4. Zilibotti, Fabrizio & Aghion, Philippe & Acemoglu, Daron, 2006. "Distance to Frontier, Selection, and Economic Growth," Scholarly Articles 4554122, Harvard University Department of Economics.
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Cited by:
  1. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.

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