Local industrial policy and productivity: Evidence from China

Jingjing Chen, Han Feng and Hong Zhou

Contemporary Economic Policy, 2022, vol. 40, issue 1, 138-161

Abstract: Subnational governments played key roles in China's past rapid growth, and local industrial policy was among their most frequently used tools. Using a plausible comprehensive local industrial policies variable constructed using local Five‐Year Plans and a comprehensive dataset of all medium and large firms in China between 1998 and 2013, this paper attempts to understand whether such interventions are helpful for China's growth. Our results indicate that although local industrial policies attract more low productivity firms, they do achieve their purpose of improving the productivity of the targeted sectors, at firm and city levels, especially in the long run.

Date: 2022
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