Do Place-Based Programs Affect Local Innovation and Entrepreneurship?

43 Pages Posted: 13 Feb 2018 Last revised: 16 Mar 2018

See all articles by Xuan Tian

Xuan Tian

Tsinghua University - PBC School of Finance

Jiajie Xu

Boston College - Department of Finance

Date Written: February 5, 2018

Abstract

This paper explores how a prominent place-based program in China, the establishment of national high-tech zones, affects local innovation and entrepreneurship. Relying on plausible exogenous variation in place-based programs caused by staggered establishments of national high-tech zones in 473 Chinese cities and using a difference-in-differences approach, we find that the establishment of national high-tech zones has a positive effect on local innovation output and entrepreneurial activities. A number of additional tests suggest that the effects appear to be causal and are unlikely driven by chance. Favorable tax treatments, talent cultivation, and land price reductions offered by national high-tech zones are three plausible underlying mechanisms through which high-tech zones promote local innovation and entrepreneurship. Our paper sheds new light on the real effect of China’s national high-tech zones and provides new evidence in the debate about the real effect of place-based programs.

Keywords: Innovation, Entrepreneurship, Place-based policy

JEL Classification: G30, L26, O31, R50

Suggested Citation

Tian, Xuan and Xu, Jiajie, Do Place-Based Programs Affect Local Innovation and Entrepreneurship? (February 5, 2018). Available at SSRN: https://ssrn.com/abstract=3118661 or http://dx.doi.org/10.2139/ssrn.3118661

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Jiajie Xu

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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