2020/05/21 by Anthony Howell · 8 citations
Economics, Econometrics and Finance · #China #Counterfactual thinking #Econometrics #Economic geography #Economics #Endogeneity #Fiscal Policy and Economic Growth #Geography #Industrial policy #Inequality #International trade #Labour economics #Lagging #Macroeconomics #Market economy #Productivity #Quantile regression #Regional Economics and Spatial Analysis #Space (punctuation) #Spatial and Panel Data Analysis #Subsidy
paper · doi:10.1111/jors.12497
published in Journal of Regional Science 60(5), 1025-1046 (Wiley)
openalex publication_date 2020/05/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/25
Abstract This paper examines the spatial patterns of China's industrial encouragement policy and its distributional impact on firm productivity. To this end, I develop separate proxies to measure three popular policy instruments (subsidies, tax holidays, and preferential access to loans). I first show that China's industrial support policies tend to exhibit a prominent spatial feature of targeting firms located in lagging cities with lower density. Taking into account potential endogeneity of industrial policy, unobserved heterogeneity and firm dynamics, quantile regression techniques show that more intense industrial support leads to: (a) a reduction in the productivity of lower‐performing firms, especially in denser cities; and (b) a small productivity gain for better performing firms but only in denser cities. Counterfactual analysis further reveals that pursuing an alternative, space‐neutral industrial encouragement policy would increase average productivity by 14–16%, in aggregate, but also contribute to significantly higher regional inequality.