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

Lin Shao, Fabrizio Zilibotti and Simon Alder

No 1309, 2013 Meeting Papers from Society for Economic Dynamics

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.

Date: 2013
New Economics Papers: this item is included in nep-ger and nep-ure
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Working Paper: The Effect of Economic Reform and Industrial Policy in a Panel of Chinese Cities (2012)
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