Journal of Economic Growth

, Volume 21, Issue 4, pp 305–349 | Cite as

Economic reforms and industrial policy in a panel of Chinese cities

  • Simon Alder
  • Lin Shao
  • Fabrizio ZilibottiEmail author


We study the effect of place-based industrial policy on economic development, focusing on the establishment of Special Economic Zones (SEZ) in China. We use data from a panel of Chinese (prefecture-level) cities from 1988 to 2010. Our difference-in-difference estimation exploits the variation in the establishment of SEZ across time and space. We find that the establishment of a state-level SEZ is associated with an increase in the level of GDP of about 20 %. This finding is confirmed with alternative specifications and in a sub-sample of inland provinces, where the selection of cities to host the zones was based on administrative criteria. The main channel is a positive effect on physical capital accumulation, although SEZ also have a positive effect on total factor productivity and human capital investments. We also investigate whether there are spillover effects of SEZ on neighboring regions or cities further away. We find positive and often significant spillover effects.


China Economic growth Economic reforms Industrial policy Special economic zones Productivity 

JEL Classification

H72 L52 O25 O38 O53 P21 R11 



We thank Oded Galor and four referees as well as Simeon D. Alder, Thomas Chaney, Silvio Contessi, Florian Hälg, James Kung, Minho Kim, Stelios Michalopoulos, Ben Olken, Jody Ono, Janneke Pieters, Raymond Riezman, Dominic Rohner, Zheng Song, Kjetil Storesletten, Nico Voigtlaender, Xiaodong Zhu, Josef Zweimüller, as well as seminar participants at the Chinese University of Hong Kong, DEGIT XVII, Royal Economic Society Meeting, SED Meeting, Tsinghua Macro Workshop, University of Bern, University of Zurich, Washington University in St. Louis, Missouri Economics Conference, ZEW Mannheim, and UNC Charlotte. We also thank Xiaojun Chen, Florian Hälg, Lingqing Jiang, Yung-Chieh Huang, Liu Liu, Sebastian Ottinger, Matthias Schief, and Laura Zwyssig for excellent research assistance. Financial support from the European Research Council (ERC Advanced Grant IPCDP-229883) and the Swiss National Science Foundation (SCOPES Grant IZ73Z0_152730) is gratefully acknowledged. Each of the three authors declares that he or she has no relevant or material financial interests that relate to the research described in this paper.

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.University of North Carolina at Chapel HillChapel HillUSA
  2. 2.Washington University in St. LouisSt. LouisUSA
  3. 3.University of ZurichZurichSwitzerland

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