Industrial policies and development of grain clusters: Evidence from China's policy in major grain-producing areas

Grain shortage remains a prominent concern in many developing countries. While clusters are recognized as effective forms of industrial organization, there is limited empirical studies regarding on which industrial policies effectively promote the development of grain clusters. This study addresses this gap by using a comprehensive dataset CCAD, which covers nearly all agro-related enterprises registered in China, through which we identified the enterprises in each link of the grain industry chain and provided a detailed account of the evolution of grain clusters. Employing a difference-in-differences strategy, we empirically evaluated the impact of China's policy in major grain-producing areas (MGPA) on grain clusters. Our findings indicate a significant contribution of the policy in MGPA to the development of grain clusters, and its impact varies across different links in the grain industry chain. Subsequent analyses reveal that the impact is driven by several mechanisms, including government fiscal support, grain subsidies, profit expectation and the the number and scale of entered grain enterprises. This study also finds that in areas where cooperatives and family farms are fully developed, policy effects are more pronounced. These findings highlight the crucial impact of industrial policies on shaping grain cluster development.