Place-Based Policies, Creation and Agglomeration Economies: Evidence from China's Economic Zone Program
- American Economic Journal: Economic Policy (Forthcoming)
Combining rich firm and administrative data, this paper examines the incidence and effectiveness of a prominent place-based policy in China: Special Economic Zones. Establishing zones is found to have had a positive effect on capital investment, employment, output, productivity and wages, and to have increased the number of firms in the designated areas. Net entry plays a larger role in generating those effects than incumbents. The special zone pro- gram’s net benefits over three years are estimated to amount to about US$15.42 billion. Capital-intensive industries benefit more than labor-intensive ones from the zone programs.
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