Industrialization from Scratch: The Persistent Effects of China's 'Third Front Movement'

61 Pages Posted: 21 Oct 2015  

Jingting Fan

University of Maryland - Department of Economics

Ben Zou

Michigan State University

Date Written: October 20, 2015

Abstract

This paper studies the long-run impacts of industrial investment on the structural transformation of agrarian local economies. We exploit a massive industrialization campaign in China known as the "Third Front Movement," which invested heavily in the industrial sector in China's remote and largely agrarian areas (the Third Front Region) in the 1960s and 1970s. Exploiting the quasi-randomness in the geographic distribution of the Movement's investment, we find that local economies that received more investment continue to have larger and faster-growing modern sectors over two decades after the Movement ended. Urbanization is mainly accounted for by rural-to-urban transformation within the same local economy, rather than inter-regional migration. Therefore, the effects of the Movement are captured by the local residents. We find that the persistent effects are sustained by positive spillovers to a fast-growing non-state sector and explore several channels through which those spillovers take place. Finally, we discuss the welfare implications of the Movement at the national level.

Keywords: Structural Transformation, Regional Economic Development, Chinese Economy

JEL Classification: O14, O18, R1

Suggested Citation

Fan, Jingting and Zou, Ben, Industrialization from Scratch: The Persistent Effects of China's 'Third Front Movement' (October 20, 2015). Available at SSRN: https://ssrn.com/abstract=2676645 or http://dx.doi.org/10.2139/ssrn.2676645

Jingting Fan

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

HOME PAGE: http://econweb.umd.edu/~fan/

Ben Zou (Contact Author)

Michigan State University ( email )

486 W. Circle Drive
110 Marshall-Adams Hall
East Lansing, MI 48824
United States

HOME PAGE: http://zouben.weebly.com/

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