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Industrialization from scratch: The “Construction of Third Front” and local economic development in China's hinterland

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  • Fan, Jingting
  • Zou, Ben

Abstract

This paper investigates whether temporary subsidies to the manufacturing sector at an early stage of structural transformation stimulate economic development. We study the “Construction of Third Front” (TF), a massive yet short-lived industrialization campaign in China's under-developed hinterland. Motivated by defense considerations, location choices of TF projects followed a peculiar set of criteria, which generates plausibly exogenous variation in manufacturing capacity before market reforms started in the mid-1980s. We find initial advantages in manufacturing have long-run positive effects on the structural transformation of the local economy. The effects are driven by new entrants in the private sector, consistent with the existence of local agglomeration economics. However, there is no evidence that agglomeration forces are stronger in initially less-developed regions. While the TF reduced regional inequality, it likely hurt the aggregate efficiency.

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  • Fan, Jingting & Zou, Ben, 2021. "Industrialization from scratch: The “Construction of Third Front” and local economic development in China's hinterland," Journal of Development Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:deveco:v:152:y:2021:i:c:s0304387821000754
    DOI: 10.1016/j.jdeveco.2021.102698
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    2. Bo, Shiyu & Liu, Cong & Zhou, Yan, 2023. "Military investment and the rise of industrial clusters: Evidence from China’s self-strengthening movement," Journal of Development Economics, Elsevier, vol. 161(C).

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    More about this item

    Keywords

    Structural transformation; Regional economic development; Agglomeration economics; Industrial policy;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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