The Impact of Place-Based Policy: Evidence from a Multiple Synthetic Control Analysis of the Northeastern Revitalization Program in China

Justin Callais and Linan Peng
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Justin Callais: Department of Agricultural and Applied Economics, Texas Tech University
Linan Peng: Department of Economics and Management, DePauw University

No 2021-03, Working Papers from DePauw University, School of Business and Leadership and Department of Economics and Management

Abstract: We examine the effect of a well-known place-based policy in China, the Northeastern Revitalization Program. In 2003, the State Council of the People’s Republic of China initiated the program in northeastern China by removing an agricultural tax, enhancing the urban social security system, facilitating foreign investments, and restructuring state-owned enterprises (SOEs) in the region. Using a budding case-study approach (the synthetic control method), we find that the program had no significant effect on GDP per capita in all three regions. Liaoning had slightly worse GDP per capita post-treatment, as well as Heilongjiang (albeit to a less extent). While the multiple synthetic control analysis shows that economic outcomes were worse post-treatment, the impact of this program was heterogeneous across the three regions. We argue the lackluster performance likely comes from the continuing dominance of inefficient SOEs in the provinces.

Date: 2021-09-29
New Economics Papers: this item is included in nep-cna and nep-ure
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