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Lifting the Veil: Using a Spatial Discontinuity to Assess the Impact of National Development Zones on Upgrading of Chinese Manufacturing

Shouwei Qi (), Yating Chen () and Kaili Chu ()
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Shouwei Qi: Zhongnan University of Economics and Law
Yating Chen: Zhongnan University of Economics and Law
Kaili Chu: Zhongnan University of Economics and Law

Open Economies Review, 2024, vol. 35, issue 4, No 8, 855-886

Abstract: Abstract Using a spatial discontinuity created by geographic boundary lines, this paper evaluates the incidence and effectiveness of a prominent place-based policy in China: national development zones (NDZs). Combining comprehensive firm-level and administrative data, the establishment of NDZs is found to have a significant impact on upgrading the technological level of Chinese manufacturing firms. NDZs promote the technological level of manufacturing firms by enhancing productivity and fostering innovation, with support from fiscal and taxation policies. The effects are heterogeneous: foreign-funded firms, small and medium-sized firms, and newly set up firms experience larger benefits. Cities with multiple NDZs realize greater effects compared to those with only one. The ability of NDZs to promote the technological level of firms is also higher in cities with a higher administrative status. Additionally, the impact varies based on whether the NDZ is an economic or a high-tech zone and its location in China's eastern, central, western, or northeastern regions. Our findings provide empirical support for the government to develop place-based industrial policies further.

Keywords: National development zones; Place-based policy; Manufacturing; Technological advancement (search for similar items in EconPapers)
JEL-codes: L52 O14 O25 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11079-024-09766-5

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