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Lifting the Veil: Using a Spatial Discontinuity to Assess the Impact of National Development Zones on Upgrading of Chinese Manufacturing

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  • Shouwei Qi

    (Zhongnan University of Economics and Law)

  • Yating Chen

    (Zhongnan University of Economics and Law)

  • Kaili Chu

    (Zhongnan University of Economics and Law)

Abstract

Using a spatial discontinuity created by geographic boundary lines, this paper evaluates the incidence and effectiveness of a prominent place-based policy in China: national development zones (NDZs). Combining comprehensive firm-level and administrative data, the establishment of NDZs is found to have a significant impact on upgrading the technological level of Chinese manufacturing firms. NDZs promote the technological level of manufacturing firms by enhancing productivity and fostering innovation, with support from fiscal and taxation policies. The effects are heterogeneous: foreign-funded firms, small and medium-sized firms, and newly set up firms experience larger benefits. Cities with multiple NDZs realize greater effects compared to those with only one. The ability of NDZs to promote the technological level of firms is also higher in cities with a higher administrative status. Additionally, the impact varies based on whether the NDZ is an economic or a high-tech zone and its location in China's eastern, central, western, or northeastern regions. Our findings provide empirical support for the government to develop place-based industrial policies further.

Suggested Citation

  • Shouwei Qi & Yating Chen & Kaili Chu, 2024. "Lifting the Veil: Using a Spatial Discontinuity to Assess the Impact of National Development Zones on Upgrading of Chinese Manufacturing," Open Economies Review, Springer, vol. 35(4), pages 855-886, September.
    • Handle: RePEc:kap:openec:v:35:y:2024:i:4:d:10.1007_s11079-024-09766-5
    DOI: 10.1007/s11079-024-09766-5
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    Keywords

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    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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