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Bureaucratic integration and regional specialization in China

Author

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  • Bai, Chong-En
  • Tao, Zhigang
  • Tong, Yueting Sarah

Abstract

Fiscal decentralization introduced as part of China's economic reform since 1979 has unleashed strong incentives for China's local governments to pursue economic development, but the same incentives have also led to local protectionist policies inhibiting the process of regional specialization. This paper focuses on the constraints or freedom with which local governments can implement their protectionist policies. Using a panel data of 29 China's regions over the time period of 1985-1997, we find that China's political system of bureaucratic integration (specifically, concurrent appointment of local government officials in the central government) imposes constraints on the local governments from practicing protectionism. We also find that the effectiveness of local protectionist policies is limited by market competition, specifically, competition from foreign-invested firms operating in China and foreign imports. Our results on the role of local protectionism remain robust to controls for the regional variations in the size of the economy and the stage of economic development.

Suggested Citation

  • Bai, Chong-En & Tao, Zhigang & Tong, Yueting Sarah, 2008. "Bureaucratic integration and regional specialization in China," China Economic Review, Elsevier, vol. 19(2), pages 308-319, June.
  • Handle: RePEc:eee:chieco:v:19:y:2008:i:2:p:308-319
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    References listed on IDEAS

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    Cited by:

    1. Jia, Junxue & Guo, Qingwang & Zhang, Jing, 2014. "Fiscal decentralization and local expenditure policy in China," China Economic Review, Elsevier, vol. 28(C), pages 107-122.
    2. Long, Cheryl Xiaoning & Wang, Jun, 2015. "Judicial local protectionism in China: An empirical study of IP cases," International Review of Law and Economics, Elsevier, vol. 42(C), pages 48-59.
    3. Herrmann-Pillath, Carsten & Libman, Alexander & Xiaofan, Yu, 2010. "State and market integration in China: A spatial econometrics approach to 'local protectionism'," Frankfurt School - Working Paper Series 137, Frankfurt School of Finance and Management.
    4. repec:bla:etrans:v:25:y:2017:i:3:p:439-469 is not listed on IDEAS
    5. Herrmann-Pillath, Carsten & Libman, Alexander & Yu, Xiaofan, 2014. "Economic integration in China: Politics and culture," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 470-492.
    6. Changqi Wu & Zhicheng Liu, 2012. "A Tiger Without Teeth? Regulation of Administrative Monopoly Under China’s Anti-Monopoly Law," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(1), pages 133-155, August.
    7. Li, Lixing, 2011. "The incentive role of creating "cities" in China," China Economic Review, Elsevier, vol. 22(1), pages 172-181, March.
    8. Blanc-Brude, Frédéric & Cookson, Graham & Piesse, Jenifer & Strange, Roger, 2014. "The FDI location decision: Distance and the effects of spatial dependence," International Business Review, Elsevier, vol. 23(4), pages 797-810.
    9. Changyuan Luo & Jun Zhang, 2010. "China Trade Policy Review: A Political Economy Approach," The World Economy, Wiley Blackwell, vol. 33(11), pages 1390-1413, November.
    10. Li, Donghui & Liao, Li & Luo, Yuanhang & Zhang, Xueyong, 2014. "Firm headquarters location, ownership structure, and stock return co-movements," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 158-172.
    11. Jeffrey S. Zax & Yin He, 2016. "The Law Of One Price In Chinese Factor Markets," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-31, September.

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