TY - JOUR
T1 - Industrialization from scratch
T2 - The “Construction of Third Front” and local economic development in China's hinterland
AU - Fan, Jingting
AU - Zou, Ben
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/9
Y1 - 2021/9
N2 - This paper investigates whether temporary subsidies to the manufacturing sector at an early stage of structural transformation stimulate economic development. We study the “Construction of Third Front” (TF), a massive yet short-lived industrialization campaign in China's under-developed hinterland. Motivated by defense considerations, location choices of TF projects followed a peculiar set of criteria, which generates plausibly exogenous variation in manufacturing capacity before market reforms started in the mid-1980s. We find initial advantages in manufacturing have long-run positive effects on the structural transformation of the local economy. The effects are driven by new entrants in the private sector, consistent with the existence of local agglomeration economics. However, there is no evidence that agglomeration forces are stronger in initially less-developed regions. While the TF reduced regional inequality, it likely hurt the aggregate efficiency.
AB - This paper investigates whether temporary subsidies to the manufacturing sector at an early stage of structural transformation stimulate economic development. We study the “Construction of Third Front” (TF), a massive yet short-lived industrialization campaign in China's under-developed hinterland. Motivated by defense considerations, location choices of TF projects followed a peculiar set of criteria, which generates plausibly exogenous variation in manufacturing capacity before market reforms started in the mid-1980s. We find initial advantages in manufacturing have long-run positive effects on the structural transformation of the local economy. The effects are driven by new entrants in the private sector, consistent with the existence of local agglomeration economics. However, there is no evidence that agglomeration forces are stronger in initially less-developed regions. While the TF reduced regional inequality, it likely hurt the aggregate efficiency.
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U2 - 10.1016/j.jdeveco.2021.102698
DO - 10.1016/j.jdeveco.2021.102698
M3 - Article
AN - SCOPUS:85108271167
SN - 0304-3878
VL - 152
JO - Journal of Development Economics
JF - Journal of Development Economics
M1 - 102698
ER -