IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v87y2025icp1522-1556.html
   My bibliography  Save this article

Place-based policies, financial friction, and city size: Evidence from China’s institutional opening-up

Author

Listed:
  • Wang, Zhenyu

Abstract

This paper investigates the impact of place-based economic policies on urban growth trajectories, focusing on the Institutional Opening-up (IOP) policy implemented through Pilot Free Trade Zones since 2013. Using a multi-period difference-in-differences approach, we find that IOP significantly increases city size, evidenced by an 8.87 % growth in the resident population of the treated cities. To explore the mechanisms underlying this expansion, we develop a spatial general equilibrium model incorporating a financial intermediation sector. The model posits that both innovation enhancement and the alleviation of financial frictions play significant roles in driving urban growth, with these insights corroborated by empirical analysis at both the city and firm levels. However, the policy also exacerbates urban growth imbalances. While cities within 100 km of treated zones experience positive spillover effects, those within the 100–300 km range suffer significant siphoning effects. Migration survey data at the individual level suggests that these siphoning effects occur as treated cities attract labor from more distant areas while simultaneously reinforcing the settlement intentions of migrants.

Suggested Citation

  • Wang, Zhenyu, 2025. "Place-based policies, financial friction, and city size: Evidence from China’s institutional opening-up," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1522-1556.
    • Handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1522-1556
    DOI: 10.1016/j.eap.2025.07.016
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592625002863
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2025.07.016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:87:y:2025:i:c:p:1522-1556. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.