IDEAS home Printed from https://ideas.repec.org/p/uwa/wpaper/21-11.html
   My bibliography  Save this paper

High-Technology Zones, Misallocation of Resources among Cities and Aggregate Productivity: Evidence from China

Author

Listed:
  • Laiqun Jin

    (School of Business, Ningbo University)

  • Xiuyan Liu

    (School of Economics and Management, Southeast University)

  • Sam Hak Kan Tang

    (Business School, The University of Western Australia)

Abstract

Recent literature has been debating the performance of high-technology zones (HTZs) in developing countries. This paper contributes to this debate by examining how national HTZs in China affect the allocative efficiency of resources among Chinese cities as well as China’s total factor productivity (TFP) growth. This paper has two key findings: Firstly, results show that resource misallocation among cities reduces China’s TFP growth by 4.5%. In the absence of national HTZs, China’s TFP loss would have been higher by about 1.5%. Secondly, we find that China’s national HTZs improve the allocative efficiency of capital among cities by channelling capital to where there is a shortage. Interestingly, we find little evidence of productivity growth driven by technical efficiency following the establishment of HTZs. The positive effect of national HTZs on allocative efficiency can be found in cities located in the Eastern and Central regions and cities without an administrative designation.

Suggested Citation

  • Laiqun Jin & Xiuyan Liu & Sam Hak Kan Tang, 2021. "High-Technology Zones, Misallocation of Resources among Cities and Aggregate Productivity: Evidence from China," Economics Discussion / Working Papers 21-11, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:21-11
    Note: MD5 = a5c5beb355041a38019814b2ec793d5e
    as

    Download full text from publisher

    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2021/DP%2021.11_Jin%20Liu%20and%20Tang.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marc J. Melitz & Sašo Polanec, 2015. "Dynamic Olley-Pakes productivity decomposition with entry and exit," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 362-375, June.
    2. Loren Brandt & Trevor Tombe & Xiadong Zhu, 2013. "Factor Market Distortions Across Time, Space, and Sectors in China," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 39-58, January.
    3. Heyman, Fredrik & Sjoholm, Fredrik & Tingvall, Patrik Gustavsson, 2007. "Is there really a foreign ownership wage premium? Evidence from matched employer-employee data," Journal of International Economics, Elsevier, vol. 73(2), pages 355-376, November.
    4. Chang-Tai Hsieh & Enrico Moretti, 2019. "Housing Constraints and Spatial Misallocation," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 1-39, April.
    5. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    6. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    7. Yehua Dennis Wei & Chi Kin Leung, 2005. "Development Zones, Foreign Investment, and Global City Formation in Shanghai," Growth and Change, Wiley Blackwell, vol. 36(1), pages 16-40, February.
    8. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    9. Benjamin Moll, 2014. "Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?," American Economic Review, American Economic Association, vol. 104(10), pages 3186-3221, October.
    10. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
    11. Alexander Monge-Naranjo & Juan M. Sánchez & Raül Santaeulàlia-Llopis, 2019. "Natural Resources and Global Misallocation," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(2), pages 79-126, April.
    12. Pack, Howard, 2000. "Industrial Policy: Growth Elixir or Poison?," The World Bank Research Observer, World Bank, vol. 15(1), pages 47-67, February.
    13. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    14. Fulong Wu & Nicholas A Phelps, 2011. "(Post)Suburban Development and State Entrepreneurialism in Beijing's Outer Suburbs," Environment and Planning A, , vol. 43(2), pages 410-430, February.
    15. Chen, Shawn Xiaoguang, 2017. "VAT rate dispersion and TFP loss in China’s manufacturing sector," Economics Letters, Elsevier, vol. 155(C), pages 49-54.
    16. Abhijit Banerjee & Kaivan Munshi, 2004. "How Efficiently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 19-42.
    17. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    18. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 349-404, Elsevier.
    19. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    20. Yang, Chih-Hai & Motohashi, Kazuyuki & Chen, Jong-Rong, 2009. "Are new technology-based firms located on science parks really more innovative?: Evidence from Taiwan," Research Policy, Elsevier, vol. 38(1), pages 77-85, February.
    21. Anthony Howell, 2019. "Heterogeneous impacts of China's economic and development zone program," Journal of Regional Science, Wiley Blackwell, vol. 59(5), pages 797-818, November.
    22. Peters, Michael, 2013. "Heterogeneous mark-ups, growth and endogenous misallocation," LSE Research Online Documents on Economics 54254, London School of Economics and Political Science, LSE Library.
    23. Abhijit V. Banerjee & Benjamin Moll, 2010. "Why Does Misallocation Persist?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 189-206, January.
    24. Demurger, Sylvie & Sachs, Jeffrey D. & Woo, Wing Thye & BAO, Shuming & Chang, Gene, 2002. "The relative contributions of location and preferential policies in China's regional development: being in the right place and having the right incentives," China Economic Review, Elsevier, vol. 13(4), pages 444-465, December.
    25. John R. Baldwin & Wulong Gu, 2006. "Plant turnover and productivity growth in Canadian manufacturing," Industrial and Corporate Change, Oxford University Press, vol. 15(3), pages 417-465, June.
    26. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
    27. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    28. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
    29. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters, in: New Developments in Productivity Analysis, pages 303-372, National Bureau of Economic Research, Inc.
    30. Virgiliu Midrigan & Daniel Yi Xu, 2014. "Finance and Misallocation: Evidence from Plant-Level Data," American Economic Review, American Economic Association, vol. 104(2), pages 422-458, February.
    31. Yingcheng Li & Kai Zhu, 2017. "Spatial dependence and heterogeneity in the location processes of new high-tech firms in Nanjing, China," Papers in Regional Science, Wiley Blackwell, vol. 96(3), pages 519-535, August.
    32. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    33. Seongsoo Jang & Jinwon Kim & Max von Zedtwitz, 2017. "The importance of spatial agglomeration in product innovation: A microgeography perspective," Post-Print hal-02004347, HAL.
    34. Shang-Jin Wei & Zhuan Xie & Xiaobo Zhang, 2017. "From "Made in China" to "Innovated in China": Necessity, Prospect, and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 31(1), pages 49-70, Winter.
    35. Fukugawa, Nobuya, 2006. "Science parks in Japan and their value-added contributions to new technology-based firms," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 381-400, March.
    36. Caggese, Andrea & Cuñat, Vicente & Metzger, Daniel, 2019. "Firing the wrong workers: Financing constraints and labor misallocation," Journal of Financial Economics, Elsevier, vol. 133(3), pages 589-607.
    37. Diego Restuccia & Richard Rogerson, 2013. "Misallocation and productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 1-10, January.
    38. Shang-Jin Wei, 1995. "The Open Door Policy and China's Rapid Growth: Evidence from City-Level Data," NBER Chapters, in: Growth Theories in Light of the East Asian Experience, pages 73-104, National Bureau of Economic Research, Inc.
    39. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    40. Yingcheng Li & Xingping Wang, 2019. "Innovation in suburban development zones: Evidence from Nanjing, China," Growth and Change, Wiley Blackwell, vol. 50(1), pages 114-129, March.
    41. Boyan Jovanovic, 2014. "Misallocation and Growth," American Economic Review, American Economic Association, vol. 104(4), pages 1149-1171, April.
    42. Lofsten, Hans & Lindelof, Peter, 2002. "Science Parks and the growth of new technology-based firms--academic-industry links, innovation and markets," Research Policy, Elsevier, vol. 31(6), pages 859-876, August.
    43. Buzard, Kristy & Carlino, Gerald A. & Hunt, Robert M. & Carr, Jake K. & Smith, Tony E., 2017. "The agglomeration of American R&D labs," Journal of Urban Economics, Elsevier, vol. 101(C), pages 14-26.
    44. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," NBER Working Papers 7828, National Bureau of Economic Research, Inc.
    45. Aoki, Shuhei, 2012. "A simple accounting framework for the effect of resource misallocation on aggregate productivity," Journal of the Japanese and International Economies, Elsevier, vol. 26(4), pages 473-494.
    46. Andrés Rodríguez-Pose & Daniel Hardy, 2014. "Technology and Industrial Parks in Emerging Countries," SpringerBriefs in Regional Science, Springer, edition 127, number 978-3-319-07992-9, March.
    47. Boeing, Philipp, 2016. "The allocation and effectiveness of China’s R&D subsidies - Evidence from listed firms," Research Policy, Elsevier, vol. 45(9), pages 1774-1789.
    48. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1091-1135.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Weijie Jiang & Kairui Cao & Laiqun Jin & Yongyi Cheng & Qunfang Xu, 2022. "How Do China’s Development Zones Affect Environmental Pollution under Government Domination," Sustainability, MDPI, vol. 14(7), pages 1-18, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Laiqun Jin & Changwei Mo & Bochao Zhang & Bing Yu, 2018. "What Is the Focus of Structural Reform in China?—Comparison of the Factor Misallocation Degree within the Manufacturing Industry with a Unified Model," Sustainability, MDPI, vol. 10(11), pages 1-19, November.
    2. Jin, Laiqun & Dai, Jiaying & Jiang, Weijie & Cao, Kairui, 2023. "Digital finance and misallocation of resources among firms: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    3. Cheng Chen & Wei Tian & Miaojie Yu, 2019. "Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms," The Economic Journal, Royal Economic Society, vol. 129(624), pages 3025-3057.
    4. Xi, Qiangmin & Mei, Lin, 2022. "How did development zones affect China’s land transfers? The scale, marketization, and resource allocation effect," Land Use Policy, Elsevier, vol. 119(C).
    5. Weijie Jiang & Kairui Cao & Laiqun Jin & Yongyi Cheng & Qunfang Xu, 2022. "How Do China’s Development Zones Affect Environmental Pollution under Government Domination," Sustainability, MDPI, vol. 14(7), pages 1-18, March.
    6. Wu, Guiying Laura, 2018. "Capital misallocation in China: Financial frictions or policy distortions?," Journal of Development Economics, Elsevier, vol. 130(C), pages 203-223.
    7. Bo, Shiyu, 2020. "Centralization and regional development: Evidence from a political hierarchy reform to create cities in china," Journal of Urban Economics, Elsevier, vol. 115(C).
    8. Chen, Binkai & Lin, Justin Yifu, 2021. "Development strategy, resource misallocation and economic performance," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 612-634.
    9. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    10. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    11. Elisa Gamberoni & Claire Giordano & Paloma Lopez-Garcia, 2016. "Capital and labour (mis)allocation in the euro area: Some stylized facts and determinants," Questioni di Economia e Finanza (Occasional Papers) 349, Bank of Italy, Economic Research and International Relations Area.
    12. David Autor & David Dorn & Gordon Hanson, 2021. "On the Persistence of the China Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 52(2 (Fall)), pages 381-476.
    13. Toni M. Whited & Jake Zhao, 2021. "The Misallocation of Finance," Journal of Finance, American Finance Association, vol. 76(5), pages 2359-2407, October.
    14. Redha Fares, 2022. "Bankruptcy, Performance and Market Selection: Evidence from Firms in France," Erudite Ph.D Dissertations, Erudite, number ph22-01 edited by Claude Mathieu, December.
    15. Xinze Li & Luojia Wang & Kerui Du, 2023. "How do environmental regulations influence resource misallocation in China? The role of investment flows," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 538-550, January.
    16. Dai, Xiaoyong & Sun, Zao, 2021. "Does firm innovation improve aggregate industry productivity? Evidence from Chinese manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 1-9.
    17. Wang, Shuhong & Zhao, Danqing & Chen, Hanxue, 2020. "Government corruption, resource misallocation, and ecological efficiency," Energy Economics, Elsevier, vol. 85(C).
    18. Ek, Chanbora & Wu, Guiying Laura, 2018. "Investment-cash flow sensitivities and capital misallocation," Journal of Development Economics, Elsevier, vol. 133(C), pages 220-230.
    19. Li, Hao-Chung & Lee, Wen-Chieh & Ko, Bo-Ting, 2017. "What determines misallocation in innovation? A study of regional innovation in China," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 221-237.
    20. Gabriella Berloffa & Eleonora Matteazzi & Alina Şandor & Paola Villa, 2019. "The quality of employment in the early labour market experience of young Europeans," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(6), pages 1549-1575.

    More about this item

    Keywords

    High-technology zones; Misallocation of resources; Total factor productivity; China;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwa:wpaper:21-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sam Tang (email available below). General contact details of provider: https://edirc.repec.org/data/deuwaau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.