Do Place-Based Policies Work? Micro-Level Evidence from China's Economic Zone Program

Exploiting two geo-coded firm censuses, this paper examines the impact of China's Special Economic Zones on economic activity in the targeted areas. We find that economic zones have a positive effect on employment, output and capital, and increase the number of firms. We also find that firm births and deaths play a larger role in explaining the zones' effects than incumbents and relocations. Finally, a zone's effectiveness depends on a program's features. Capital-intensive industries exhibit larger positive zone effects than labor-intensive ones. Location characteristics such as market potential and transportation accessibility are not critical factors in enhancing the program effects.