Economic reforms and industrial policy in a panel of Chinese cities
AbstractThe process of economic reforms launched in 1978, and gradually extended until current days, has catapulted China into a stellar growth trajectory that has proven highly resilient. In this paper, we estimate the effect on economic development of China’s industrial policy, in particular, the establishment of Special Economic Zones (SEZ), a salient economic reform. 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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Bibliographic InfoPaper provided by UBS International Center of Economics in Society - Department of Economics - University of Zurich in its series UBSCENTER - Working Papers with number 005.
Date of creation: Nov 2013
Date of revision:
China; economic growth; economic reforms; difference-in-difference; industrial policy; investments; satellite light; total factor productivity; Special Economic Zones;
Find related papers by JEL classification:
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-29 (All new papers)
- NEP-TRA-2013-12-29 (Transition Economics)
- NEP-URE-2013-12-29 (Urban & Real Estate Economics)
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