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The Effect of Economic Reform and Industrial Policy in a Panel of Chinese Cities

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  • Lin Shao

    (Washington University of St. Louis)

  • Fabrizio Zilibotti

    (University of Zurich)

  • Simon Alder

    (University of Zurich)

Abstract

We use the establishment of Special Economic Zones in China to estimate the effect of economic reforms on GDP. A panel of 270 Chinese cities from 1988 to 2010 allows us to exploit the variation in the establishment of zones across time and space. The results from our baseline fixed effects specification suggest that the establishment of a major zone led to an increase in the level of GDP between 6% and 10%, depending on the type of zone. This result is similar in a sub-sample of inland provinces, where the selection of cities in which zones were established was more transparent. Decomposing GDP into physical capital, efficient labor, and TFP shows that the effect of the zones went mainly through the accumulation of physical capital. Using electricity consumption and light intensity as two alternative measures for economic activity partly confirms these results.

Suggested Citation

  • Lin Shao & Fabrizio Zilibotti & Simon Alder, 2013. "The Effect of Economic Reform and Industrial Policy in a Panel of Chinese Cities," 2013 Meeting Papers 1309, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1309
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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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