Working Paper: NBER ID: w28000
Authors: Ruochen Dai; Dilip Mookherjee; Yingyue Quan; Xiaobo Zhang
Abstract: We examine how exposure of Chinese firms to the Covid-19 shock varied with a cluster index (measuring spatial agglomeration of firms in related industries) at the county level. Two data sources are used: entry flows of newly registered firms in the entire country, and an entrepreneur survey regarding operation of existing firms. Both show greater resilience in counties with a higher cluster index, after controlling for industry dummies and local infection rates, besides county and time dummies in the entry data. Reliance of clusters on informal entrepreneur hometown networks and closer proximity to suppliers and customers help explain these findings.
Keywords: Industrial Clusters; COVID-19; Resilience; Entrepreneur Networks
JEL Codes: L25; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cluster index (C38) | Firm resilience to COVID-19 shock (H32) |
| Higher cluster index (C38) | Lower reduction in new firm registrations (L26) |
| Cluster index (C38) | Likelihood of reopening existing firms (L26) |
| One standard deviation increase in cluster index (C38) | Entry rate (L26) |
| Higher local infection rates (H73) | Lower entry rates and reopening likelihoods (E44) |
| Clustering (C38) | Mitigated impact of higher infection rates (I14) |
| Quality of entrepreneur networks and spatial agglomeration (R32) | Resilience in clustered areas (R23) |