EconPapers    
Economics at your fingertips  
 

Place-based policies, pro-competitive effects, and allocative efficiency: Evidence from China’s economic zones

Wenyi Lyu, Jian Yang and Leng Yu

World Development, 2025, vol. 191, issue C

Abstract: Using geo-coded firm and administrative data, we examine how China’s economic zones (EZs) impact allocative efficiency by identifying the reduced markups and negative spillover effects that occur after the establishment of EZs. Both incumbents and new entrants contribute to the markup changes. Additional analysis examines the significant role of new firm entry in improving allocative efficiency in EZs. First, the pro-competitive effects in the output market rather than cost savings in the input market primarily account for the reduction in markups of manufacturing firms. Second, the productivity advantages obtained from agglomeration effects may potentially enable firms to decrease their markups by passing the efficiency gains on to customers under competitive pressure. Heterogeneous analysis further indicates that the majority of the reduction in markups is driven by firms with greater market power. Moreover, the degree of pro-competitive effects relies crucially on firm characteristics and market conditions.

Keywords: Place-based policy; Economic zones; Allocative efficiency; Markup; Pro-competitive effects; Agglomeration effects (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305750X25000567
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:191:y:2025:i:c:s0305750x25000567

DOI: 10.1016/j.worlddev.2025.106971

Access Statistics for this article

World Development is currently edited by O. T. Coomes

More articles in World Development from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-04-30
Handle: RePEc:eee:wdevel:v:191:y:2025:i:c:s0305750x25000567