Are Place-Based Policies Effective? Evidence from China’s Development Zones

Deng Huihui, Yu Yihua, Zhao Jialing

Journal of Finance and Economics Vol. 45, Issue 01, pp. 4 - 18 (2019)  DOI:10.16538/j.cnki.jfe.2019.01.001

Summary

Xi Jinping’s report to the 19^th CPC National Congress expounded the implementation of the regional coordinated development strategy for the first time, which is a significant improvement in China’s regional development strategy since the reform and opening up policy. The imbalance of China’s regional development reflects the conflicts between people’s growing needs for a better life and the imbalanced regional development in terms of the spatial distribution of economic activities, and has always been one of the major difficulties in China’s economic and social development. As a typical " place-based” policy, the significance of the development zone has gone beyond the development zone itself and become an important carrier to serve the national economic development strategy. Based on the panel data of prefecture-level cities from 2000—2015, this paper takes the cleaning up and rectifying policy of development zones in 2003 as a quasi-natural experiment and adopts the difference-in-differences propensity score matching method to estimate the impact of the " place-based” policy on regional economic development. It comes to the results as follows: the cleaning up and rectifying policy of development zones has significantly reduced regional disparity, but not significantly affected regional disparities at the per capita level. Meanwhile, the cleaning up and rectifying policy of development zones has significantly reduced regional economic growth, which in another way means the setting up of development zones has indeed promoted regional economic growth. Also it has not significantly affected regional disparities at the per capita level. On these grounds, it can be concluded that, under the circumstance of insufficient mobility of production factors, the balance of regional development at the aggregate level has been achieved through the transfer of resources and the regional preferential policies, but the regional balance at the per capita level has not been achieved. The sub-region test shows that the impact is more significant for the central and western areas but not significant for the eastern areas when it comes to the aggregate economic growth, implying that the development of the central and western may be balanced at the expense of losing efficiency in the eastern. Furthermore, cities with development zones which are within 300 km from the urban agglomeration are more advantageous than those beyond 300 km from the urban agglomeration. The heterogeneity test of metropolitan areas shows that the cleaning up and rectifying policy of the Yangtze River Delta and Beijing-Tianjin-Hebei region has greater effects on economic growth, while that of the Pearl River Delta has less effects. Therefore, the urban agglomeration and metropolitan area should be strengthened as a key to implement the " place-based” policy. By optimizing the rational layout of development zones, it will help to boost economic growth in less developed areas and narrow the gap of economic development between developed areas and less developed areas. Besides, by improving the basic public service level in the central and western areas, the loss of balance and efficiency can be avoided to some extent, thus realizing regional prosperity.

Keywords

place-based policy; regional economic growth; difference-in-differences method; quasi-natural experiment