Working Paper: NBER ID: w30744
Authors: Stephan Heblich; Marlon Seror; Hao Xu; Yanos Zylberberg
Abstract: We identify negative spillovers exerted by large, successful manufacturing plants on other local production facilities in China. A short-lived alliance between the U.S.S.R. and China led to the construction of 150 "Million-Rouble plants" in the 1950s. Our identification strategy exploits the ephemeral geopolitical context and the relative position of allied and enemy airbases to isolate exogenous variation in plant location decisions. We find a boom-and-bust pattern in hosting counties: treated counties are twice as productive as control counties in 1982, but 30% less productive in 2010. The average other establishment in treated counties is unproductive, does not innovate, and charges high markups. We find that (over)specialization limits technological spillovers. This prevents the emergence of new industrial clusters and leads to a flight of entrepreneurs.
Keywords: industrial clusters; spillovers; China; economic growth; agglomeration
JEL Codes: J24; N95; R11; R50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hosting MRPs (C59) | Local productivity (O49) |
| Unproductive nature of other establishments in treated counties (L39) | Local productivity (O49) |
| Overspecialization around MRPs (L69) | Technological spillovers (O36) |
| Hosting MRPs (C59) | Flight of entrepreneurs from treated areas (F22) |
| Establishments in treated counties (R38) | Competitiveness and innovation (O39) |