Why Geographic Dispersion before Its Time: Industrial Policy and Economic Geography in the People's Republic of China

35 Pages Posted: 19 Jan 2017

See all articles by Yiyun Wu

Yiyun Wu

Zhejiang University

Xiwei Zhu

Zhejiang University - Center for Research of Private Economy (CRPE)

Date Written: January 13, 2017

Abstract

This paper investigates the trends and determinants of geographic concentration and industrial specialization in the People’s Republic of China (PRC) using interprovincial panel data for the period from 1999 to 2010. It shows that, after 2005, both geographic concentration and industrial specialization began to decrease, resulting in an increased similarity of provincial industrial structure. Industrial policies of provincial governments cause geographic dispersion and inverse specialization. The result is robust when using instrumental variables to deal with possible reverse causality and omitted variable problems. The mechanism behind this is that central government industrial policy, which tends to last for several years, is an important reference document for each provincial planner. This causes the less-developed regions to deviate from their comparative advantages, resulting in a combination of insufficient geographic concentration and inverse specialization in the PRC.

Keywords: Geographic Concentration, Dispersal, Industrial Policy, Specialization, Local Government, Provincial Government, Economic Geography

JEL Classification: L59, L60, R12

Suggested Citation

Wu, Yiyun and Zhu, Xiwei, Why Geographic Dispersion before Its Time: Industrial Policy and Economic Geography in the People's Republic of China (January 13, 2017). ADBI Working Paper No. 633, Available at SSRN: https://ssrn.com/abstract=2901824 or http://dx.doi.org/10.2139/ssrn.2901824

Yiyun Wu (Contact Author)

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

Xiwei Zhu

Zhejiang University - Center for Research of Private Economy (CRPE) ( email )

Hangzhou, Zhejiang 310027
China

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