This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2025
  4. Program
  5. Industrial Policy, Infrastructure, and Productivity Growth in China
« Back to Results

Industrial Policy, Infrastructure, and Productivity Growth in China

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

Hilton San Francisco Union Square, Golden Gate 6
Hosted By: American Economic Association
  • Chair: Wei Xiong, Princeton University

Decoding China's Industrial Policies

Hanming Fang
,
University of Pennsylvania
Ming Li
,
Chinese University of Hong Kong-Shenzhen
Guangli Lu
,
Chinese University of Hong Kong-Shenzhen

Abstract

We decode China’s industrial policies from 2000 to 2022 by employing large language models (LLMs) to extract and analyze rich information from a comprehensive dataset of 3 million documents issued by central, provincial, and municipal governments. Through careful prompt engineering, multistage extraction and refinement, and rigorous verification, LLMs allow us to extract structured information on detailed policy dimensions, including context and scope, targeted industries, tools, implementation mechanisms, and intergovernmental relationships, etc. Combining these newly constructed industrial policy data with microlevel firm data, we document thirteen key facts about China's industrial policy that explore the following critical questions. Which industries are targeted and how does this align with local comparative advantage? What policy tools are deployed, and how does their use vary across different levels and regions of governments, as well as over the various phases of development of an industry? We also examine the impact of these policies on firm behavior, including entry, production, and productivity growth, and highlight the heterogeneous effects of different policy tools. In addition, we explore the political economy of industrial policy, focusing on top-down transmission mechanisms, policy diffusion, and persistence across regions. Finally, we document spatial inefficiencies and industry-wide overcapacity as potential downsides of industrial policies.

Serial Entrepreneurship in China

Loren Brandt
,
University of Toronto
Ruochen Dai
,
Central University of Finance and Economics
Gueorgui Kambourov
,
University of Toronto
Kjetil Storesletten
,
University of Minnesota
Xiaobo Zhang
,
Peking University

Abstract

This paper studies entrepreneurship and firm creation through the lens of serial entrepreneurs – entrepreneurs who establish more than one firm. Using data covering the universe of Chinese firms, we document key facts about serial and non-serial entrepreneurs
and develop a theory rationalizing how their behavior is shaped by ability, endowments, and capital market frictions. Serial entrepreneurs have higher average productivity and lower return on capital than non-serial entrepreneurs. However, this premium conceals significant heterogeneity, with a majority of serial entrepreneurs underperforming relative to non-serial entrepreneurs. We link these differences to capital market frictions that favor some, but not all, entrepreneurs.

On (Un)Congested Roads: A Quantitative Analysis of Infrastructure Investment Efficiency using Truck GPS Data

Simon Alder
,
Swiss National Bank and The University of North Carolina at Chapel Hill
Zheng Michael Song
,
Chinese University of Hong Kong
Zhitao Zhu
,
Chinese University of Hong Kong

Abstract

This study aims to quantify the gains from investments in a transportation network, where the elasticity of driving time to traffic (“congestion elasticity”) may differ across roads. We use high-frequency GPS data from half a million Chinese trucks to measure traffic flow and uncover the congestion elasticity
heterogeneity in China’s city-to-city road links. We find that 34% of the links are uncongested and 28% are associated with a small elasticity. In contrast, using real-time traffic data for highways in England, we find that almost all are associated with a large congestion elasticity. We next incorporate congestion elasticity heterogeneity into a quantitative general equilibrium trade model with optimal route choices and structurally estimate the model. We find the returns to be highly unequal in China, and the heterogeneity in congestion elasticity can account for more than half of the dispersion. Our findings suggest a severe misallocation of road investments in China.

State versus Market: China’s Infrastructure Investment

Shuoge Qian
,
Nanyang Technological University
Hong Ru
,
Nanyang Technological University
Wei Xiong
,
Princeton University

Abstract

Amid growing global interest in state interventions, this paper examines the impact of Chinese government infrastructure investments on improving firm productivity, focusing on a policy that directed regional governments to foster a more conducive market environment for private enterprises. Our analysis reveals that the positive effect of infrastructure investment on firm productivity is increased by 42.5% for private firms in industries with improved market access and an even more striking 97.9% in provinces with reduced arbitrary fines. These findings underscore the complementary roles of state interventions and the development of market mechanisms in boosting firm productivity.

Discussant(s)
Shaoda Wang
,
University of Chicago
Yongseok Shin
,
Washington University
Guangbin Hong
,
University of Chicago
Loren Brandt
,
University of Toronto
JEL Classifications
  • O4 - Economic Growth and Aggregate Productivity
  • H8 - Miscellaneous Issues