Working Paper: CEPR ID: DP12543
Authors: Di Guo; Kun Jiang; Chenggang Xu; Xiyi Yang
Abstract: This study examines the effects of China’s industrial clusters on its economic growth and urban–rural income inequality. A density-based index (DBI) is developed to capture the unique features of such clusters in China. From a county-level DBI panel data constructed based on firm-level and county-level datasets, we find that strong clusters and entrepreneurial clusters substantially enhance economic growth. Moreover, entrepreneurial clusters reduce urban–rural income inequality by increasing the income of rural residents. Identification issues are carefully addressed by deploying an instrumental variable approach.
Keywords: China; Clustering; Geography; Growth; Inequality; Institutions
JEL Codes: D2; H7; O1; R1; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strong industrial clusters (R32) | local economic growth (O29) |
| nonstate firms within clusters (R32) | local economic growth (O29) |
| entrepreneurial clusters (R32) | urban-rural income inequality (R11) |
| nonstate firms within clusters (R32) | urban-rural income inequality (R11) |