Urban Agglomeration and Local Economic Growth in China: The Role of New Industrial Parks

USC-INET Research Paper No. 16-06

60 Pages Posted: 18 Mar 2016

See all articles by Siqi Zheng

Siqi Zheng

Hang Lung Center for Real Estate, Tsinghua University

Weizeng Sun

Tsinghua University

Jianfeng Wu

Fudan University

Matthew E. Kahn

University of Southern California; National Bureau of Economic Research (NBER)

Date Written: March 11, 2016

Abstract

China's government has spent hundreds of billions of dollars to invest in new industrial parks with the intent of boosting the productivity of new firms attracted to the parks and to generate spillovers for the local economy in order to accelerate economic growth. Do such place based investments in capital raise urban productivity or is this another case of the powerful state misallocating capital in China (see Hsieh and Klenow 2009)? We measure the localized spillover effects of 110 parks built in eight major cities on firm productivity, wages, and local manufacturing employment growth. We find that the geographic spillover effect of parks is an increasing function of the park's overall human capital level, the FDI share, and its "synergy" with nearby incumbent firms (measured by Marshallian factors). Using geo-coded data, we document that the growth in local empolyment and wages stimulates nearby local housing construction and retail store openings. The rise of a new production sub-center causes the emergence of a suburban "consumer city".

Keywords: Industrial parks, economic growth, spillover effects, Marshallian factors

JEL Classification: R38, R42

Suggested Citation

Zheng, Siqi and Sun, Weizeng and Wu, Jianfeng and Kahn, Matthew E., Urban Agglomeration and Local Economic Growth in China: The Role of New Industrial Parks (March 11, 2016). USC-INET Research Paper No. 16-06. Available at SSRN: https://ssrn.com/abstract=2746711 or http://dx.doi.org/10.2139/ssrn.2746711

Siqi Zheng (Contact Author)

Hang Lung Center for Real Estate, Tsinghua University ( email )

HeShanHeng Building
Beijing, 100084
China

HOME PAGE: http://www.siqizheng.cn

Weizeng Sun

Tsinghua University ( email )

No Address Available

Jianfeng Wu

Fudan University

Matthew E. Kahn

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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