What Explains the Productivity Premium in China?

53 Pages Posted: 3 Apr 2020

See all articles by Anthony Howell

Anthony Howell

Arizona State University

Chong Liu

Peking University

Rudai Yang

Peking University - School of Economics

Date Written: March 12, 2020


This paper relies on the empirical framework introduced in Combes et al. (2012) to address the following main questions: (i) what are the relative contributions of agglomeration and selection forces expected to drive the urban productivity premium previously observed in Chinese cities? and (ii) to what extent does the industrial parks and zones program (IPZs), a popular place-based policy, simultaneously influence selection and agglomeration mechanisms? The main findings are as follows. First, both agglomeration and selection forces are observed in larger, denser Chinese cities, indicating that earlier studies that failed to take into account selection likely overestimate the effect of agglomeration economies. Second, after taking into account non-random site selection based on matching, the IPZ program intensifies both agglomeration and selection forces, although the results depend strongly on who administers the program. The empirical findings highlight a theoretical connection between state intervention and explaining the observed urban premium in a transitioning economy context.

Keywords: Agglomeration, Sorting, China, TFP

Suggested Citation

Howell, Anthony and Liu, Chong and Yang, Rudai, What Explains the Productivity Premium in China? (March 12, 2020). Available at SSRN: https://ssrn.com/abstract=3553356 or http://dx.doi.org/10.2139/ssrn.3553356

Anthony Howell (Contact Author)

Arizona State University ( email )

United States

HOME PAGE: http://www.tonyjhowell.com

Chong Liu

Peking University ( email )

5 Yiheyuan Road, Haidian District
Beijing, Beijing 100871

Rudai Yang

Peking University - School of Economics ( email )

Yiheyuan Road
the school of economics builiding
Beijing, 000000

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