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IS LOCAL GOVERNMENT INTERVENTION EFFECTIVE IN PROMOTING THE TFP OF AN OLD INDUSTRIAL AREA? — A SPATIAL ECONOMETRIC ANALYSIS OF NORTHEAST CHINA

Zhanhua Jia () and Guofeng Gu
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Zhanhua Jia: School of Geographical Science, Northeast, Normal University, Changchun Jilin, China
Guofeng Gu: School of Geographical Science, Northeast, Normal University, Changchun Jilin, China

The Singapore Economic Review (SER), 2021, vol. 66, issue 03, 933-951

Abstract: Northeast China is an important old industrial base in China that is most profoundly affected by the planned economic system. The social and economic development has the characteristics of powerful government and weak market. This study estimates total factor productivity (TFP) utilizing firm-level data of Northeast China, and analyzes the effect of government intervention on TFP growth by applying a spatial econometric model over the period 1998–2007. The results indicate that TFP is gradually increasing and spatially dependents on surrounding areas. Government intervention behavior has a negative effect on TFP in Northeast China. Specifically, the stronger the government’s intervention capacity is, the less TFP is; the higher the environmental connivance is, the less TFP is. Furthermore, government intervention produces adverse spillover effects on surrounding areas, which are caused by imitation and comparison between local governments. We also examine the relationship between traditional factors, including science and technology level, human capital, FDI and openness. The findings reveal that science and technology level, human capital, FDI and openness play positive roles in stimulating TFP growth. Science and technology produce positive spatial spillover on TFP growth, but other factors do not.

Keywords: Total factor productivity (TFP); government intervention; spillover effect; spatial econometric model (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0217590820500319

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