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The impact of special economic zones on producer services productivity: Evidence from China

Qiangmin Xi, Ruidong Sun and Lin Mei

China Economic Review, 2021, vol. 65, issue C

Abstract: Do Special Economic Zones (SEZs) promote the productivity of producer services, and what are the channels of the effect? To shed light on these questions, we collect a dataset of 1.46 million producer service firms on the basis of the Second Economic Census of China. We then use the dataset to prove the productivity advantages of producer service industry in the SEZs. Guided by a “new” new economic geography model, we estimate these advantages using the IV model and unconditional distribution characteristic-parameter correspondence method. Results imply that agglomeration effect is the source of the productivity advantages of the producer services in the SEZs. This effect is positively correlated with the local manufacturing scale. A high industrial relevancy between the producer services and the leading manufacturing industry in the SEZs results in a strong agglomeration effect. The preferential policy in the SEZs reduces the entry barrier for firms and attracts a high proportion of inefficient firms entering with the selection effect. This result has a negative impact on promoting the productivity of producer services. The conclusions are robust in different circumstances.

Keywords: “New” new economic geography; Special economic zones; Producer services; Selection effect; Agglomeration effect (search for similar items in EconPapers)
JEL-codes: L52 R10 R52 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:65:y:2021:i:c:s1043951x20301553

DOI: 10.1016/j.chieco.2020.101558

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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