Political Hierarchy Spillovers: Evidence from China

Abstract

This paper explores the impact of the political hierarchies of cities in China from different perspectives. First, we examine the economic disparities between prefectural cities and municipalities. Furthermore, this paper draws upon a quasi-experiment to analyze the impact of upgrading Chongqing to a municipality in 1997 using the synthetic control method. The city-upgrading policy significantly increased Chongqing’s GDP in the following four years. Finally, we find that the policy increased GDP in treated cities within 1200 kilometers of Chongqing by about 10%-13% relative to the control cities.

Keywords: Political Hierarchy, Direct-administered Municipality, Economic Development, Spillover Effect, Synthetic Control Method

JEL Classification: H11, O18, R11, R58