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Government reform and innovation performance in China

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  • Zhang, Min
  • Rodríguez-Pose, Andrés

Abstract

Innovation is key for economic growth and well-being. The capacity for innovation, however, is profoundly influenced by the quality of local institutions. Although the impact of national institutions on innovation is well-documented, the effects of subnational institutional variations on innovation remain underexplored. This paper studies the impact of government agency reforms, designed to enhance local government effectiveness, on the innovation performance of city-regions in China. We examine the adoption of these reforms between 2009 and 2016 as an exogenous shock to regional institutions. Our analysis identifies a positive and significant relationship between improvements in institutional quality and the innovation performance of Chinese city-regions, particularly pronounced in regions with medium to high levels of innovation. The results are robust to a series of checks including placebo and endogeneity tests and potential confounding policies. This research highlights the critical role of government institutions in driving innovation across China, bringing to the fore important regional variations in the adoption of government agency reforms that are defining the country's innovation landscape.

Suggested Citation

  • Zhang, Min & Rodríguez-Pose, Andrés, 2024. "Government reform and innovation performance in China," LSE Research Online Documents on Economics 122728, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:122728
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    File URL: http://eprints.lse.ac.uk/122728/
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    More about this item

    Keywords

    institutions; government quality; institutional reform; regional innovation; China; REF fund;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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