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Economic reforms and industrial policy in a panel of Chinese cities

Author

Listed:
  • Simon Alder

    (University of North Carolina at Chapel Hill)

  • Lin Shao

    (Washington University in St. Louis)

  • Fabrizio Zilibotti

    () (University of Zurich)

Abstract

Abstract We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese (prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20 %. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.

Suggested Citation

  • Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
  • Handle: RePEc:kap:jecgro:v:21:y:2016:i:4:d:10.1007_s10887-016-9131-x
    DOI: 10.1007/s10887-016-9131-x
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    Keywords

    China; Economic growth; Economic reforms; Industrial policy; Special economic zones; Productivity;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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