1

puzzle

5
 ?
CPI

6
 ?
Wei and Zhang, 2011, The Competitive Saving
Motive: Evidence from Rising Sex Ratios and
Savings Rates in China, JPE, 119 (3): 511-564.
vs

7
 ?

8


17%
62.5%

9





+

10


11


12










13


14


15


16


or







17


18

2005
06-10COD

2011

19
 % Water Inferior to Grade III in the Yangtze River
40

35

30

25

20
2003 2004 2005 2006 2007 2008 2009 2010
year

Source: Chinese Environmental Yearbooks 2004-2011 20

The share of water not acceptable for drinking use in different sections of the Yangtze River

100
80
% 60
40
20
0

down down mid mid mid mid mid up up up up

1 2 3 4 5 6 7 8 9 10 11
2005 2010

Source: Chinese Environmental Yearbooks 2004-2011 21



U.S. Clean Air Act

22


--
2005
2005
11-5

23
Provincial COD reduction mandates of the 11th Five-Year Plan

2005 2010

(10,000 tons) (10,000 tons) (10,000 tons)

Panel A: The Yangtze River Basin

Shanghai 30.4 25.9 4.50
Jiangsu 96.6 82 14.60
Zhejiang 59.5 50.5 9.00
Anhui 44.4 41.5 2.90
Jiangxi 45.7 43.4 2.30
Hubei 61.6 58.5 3.10
Henan 72.1 64.3 7.80
Hunan 89.5 80.5 9.00
Shaanxi 35 31.5 3.50
Chongqing 26.9 23.9 3.00
Sichuan 78.3 74.4 3.90
Guizhou 22.6 21 1.60
Yunnan 28.5 27.1 1.40 24
c

Pc ,2005
CODc ,0510 CODp ,0510

J
j 1
Pj ,2005
Pc ,2005 Pc2005

25


yct = ct
yct = ct + Postt
yct = ct + Postt Rc + c + t

Postt *Rc

26
yict Rc Postt Dirtyi ct it ic ict
Dirtyi = 1
ct
it
ic

27

8511*2003-2009*2
ASIF
pulp and paper production
chemical materials and products
electronic appliances manufacturing
special appliances manufacturing
electric appliances manufacturing
office appliances manufacturing

28
The spatial distribution of water-polluting and non-water-polluting production
along the Yangtze River

Water-polluting industries Water-polluting industries

1 1

cumulative shares
.9 .9
.8 .8
.7 .7
.6 .6
.5 .5
.4 .4
1
2
3
4
5
6
7
8
9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

10
11
12
13
14
15
16
17
18
19
20
Distance box (distance to Shanghai) Distance box (distance to Shanghai)

2003 2006 2006 2009

Non-water-polluting industries Non-water-polluting industries

1 1
cumulative shares

.9 .9
.8 .8
.7 .7
.6
.6
.5
.5 .4
.4
1
2
3
4
5
6
7
8
9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

10
11
12
13
14
15
16
17
18
19
20
Distance box (distance to Shanghai) Distance box (distance to Shanghai)

2003 2006 2006 2009

29

39
output value of industry i in city c
CODc,0510 CODp ,0510 i
i 1 output value of industry i in province p

All cities Downstream Upstream

River distance to Shanghai <900 km >900km
COD reduction mandate 0.540 0.953 0.368
(10,000 tons) [0.830] [1.226] [0.517]
Observations 85 25 60

30



2006-2008
2004-2005
All cities Downstream Upstream
River distance to Shanghai <900 km >900km
Avg. environment text share
2.319 2.881 2.092
(2006, 2007, 2008)
(%) [1.012] [1.225] [0.820]
Observations 80 23 57
Avg. environment text share
1.360 1.393 1.346
(2004, 2005)
(%) [0.566] [0.581] [0.565]
Observations 79 24 55
31

Dependent variable: log(total output value in each industry in each city in each year)
(1) (2) (3) (4) (5) (6)
COD reduction mandate* Post* Dirty -0.435** -0.441**
(0.194) (0.199)
COD reduction mandate* Post* Pulp and paper -0.320**
(0.142)
COD reduction mandate* Post* Chemical -0.549***
(0.161)

Avg. environment text share* Post* Dirty -0.464*** -0.515***

(0.179) (0.189)
Avg. environment text share* Post* Pulp and
paper -0.415***
(0.142)
Avg. environment text share* Post* Chemical -0.514***
(0.154)
Log GDP per capita (t-1)* Dirty -2.952** -2.803**
(1.282) (1.219)
Log city population (t-1)* Dirty 19.172 23.829*
(12.172) (12.481)
City-year fixed effects Yes Yes Yes Yes Yes Yes
Industry-year fixed effects Yes Yes Yes Yes Yes Yes
City-industry fixed effects Yes Yes Yes Yes Yes Yes
Observations 3,570 3,570 3,570 3,360 3,360 323,360
R-squared 0.942 0.942 0.942 0.944 0.944 0.945

Dependent variable: log(total output value in each industry in each city in each year)
(1) (2)
X* 2004 Year Dummy* Dirty 0.017 0.060
(0.079) (0.087)
X* 2005 Year Dummy* Dirty 0.075 0.118
(0.112) (0.091)
X* 2006 Year Dummy* Dirty 0.106 0.064
(0.114) (0.111)
X* 2007 Year Dummy* Dirty 0.105 0.060
(0.109) (0.110)
X* 2008 Year Dummy* Dirty -0.631** -0.618**
(0.287) (0.293)
X* 2009 Year Dummy* Dirty -0.630** -0.654**
(0.291) (0.273)
City-year fixed effects Yes Yes
Industry-year fixed effects Yes Yes
City-industry fixed effects Yes Yes
Observations 3,570 3,360
R-squared 0.942 0.945
(1) X= COD reduction mandate (2) X= Avg. environment text share
33

Dependent variable: log(total output value in each industry in each city in each year)
(1) (2)
Avg. environment text share 0405* Post* Dirty 0.078
(0.243)
Avg. environment text share 0405* 2004 Year Dummy* Dirty 0.288
(0.251)
Avg. environment text share 0405* 2005 Year Dummy* Dirty 0.232
(0.201)
Avg. environment text share 0405* 2006 Year Dummy* Dirty 0.314
(0.279)
Avg. environment text share 0405* 2007 Year Dummy* Dirty 0.039
(0.185)
Avg. environment text share 0405* 2008 Year Dummy* Dirty 0.499
(0.441)
Avg. environment text share 0405* 2009 Year Dummy* Dirty 0.320
(0.363)
City-year fixed effects Yes Yes
Industry-year fixed effects Yes Yes
City-industry fixed effects Yes Yes
Observations 3,318 3,318 34
R-squared 0.948 0.948

Dependent variable: log(total output value in each industry in each city in each year)
(1) (2) (3) (4) (5) (6) (7)
All SOE Private Domestic Foreign Large Small
COD reduction * Post* Dirty -0.435** 0.030 -0.459** -0.463** -0.339 -0.244 -0.391**
(0.194) (0.204) (0.201) (0.210) (0.234) (0.241) (0.163)
City-year fixed effects Yes Yes Yes Yes Yes Yes Yes
Industry-year fixed effects Yes Yes Yes Yes Yes Yes Yes
City-industry fixed effects Yes Yes Yes Yes Yes Yes Yes
Observations 3,570 3,570 3,570 3,570 3,570 3,570 3,570
R-squared 0.942 0.872 0.938 0.934 0.892 0.918 0.907

Dependent variable: log(total output value in each industry in each city in each year)
(1) (2) (3) (4) (5) (6) (7)
All SOE Private Domestic Foreign Large Small
Avg. text share* Post* Dirty -0.464*** -0.276* -0.407** -0.452** -0.446** -0.393 -0.572***
(0.179) (0.155) (0.177) (0.196) (0.219) (0.250) (0.210)
City-year fixed effects Yes Yes Yes Yes Yes Yes Yes
Industry-year fixed effects Yes Yes Yes Yes Yes Yes Yes
City-industry fixed effects Yes Yes Yes Yes Yes Yes Yes
Observations 3,360 3,360 3,360 3,360 3,360 3,360 3,360
35
R-squared 0.944 0.876 0.940 0.936 0.891 0.916 0.910

Dependent variable: log(total output value in each industry in each city in each year)
(1)
Upstream* 2004 Year Dummy* Dirty -0.445**
(0.177)
Upstream* 2005 Year Dummy* Dirty -0.280**
(0.136)
Upstream* 2006 Year Dummy* Dirty -0.145
(0.229)
Upstream* 2007 Year Dummy* Dirty -0.115
(0.200)
Upstream* 2008 Year Dummy* Dirty 0.916*
(0.485)
Upstream* 2009 Year Dummy* Dirty 1.472***
(0.438)
City-year fixed effects Yes
Industry-year fixed effects Yes
City-industry fixed effects Yes
Observations 3,570
R-squared 0.942
36


37

R&D

38

2008
15%
33%15-24%
5%
2008

39
Induced Notch in Profit Functions

40
Induced Notch in Profit Functions

41
Theoretical Predictions of Bunching

42
Theoretical Predictions of Bunching

43
2006-2007

44
2011

45


46


47
48


49
Inter-industry relatedness and industrial-policy efficiency:
Evidence from China's Export Processing Zones

57 EPZs
the first wave of EPZs in each location (47)

50


EPZ

EPZ

51
 1 Introduction
spatially-targeted programs in China: EPZs
3,000 EPZs in 135 countries (Akinci and Crittle, 2008)
2000-2005: 57
Tax and customs duty incentives, preferential treatment
(Wang and Wei, 2010)

inconsistency of industrial policy

with the local productive structure (Lin, 2012, Cai et al., 2011)
knowledge requirements (Hausmann and Hidalgo, 2011)

52
 Little empirical evidence on:
policy effectiveness
repercussions of any potential inconsistency
between sectoral targeting and the local
productive structure
This paper:
effect of establishing EPZs on exports
city-sector-level data & information on the
targeted sectors in each zone
whether the effect depends on the local
availability of the necessary capabilities and
resources

53
 Main contribution I
effectiveness of preferential regional policy
programs in China (Wang, 2013; Schminke and Van
Biesebroeck, 2013; Adler et al., 2013; Cheng, 2014)
focus on the repercussions on local GDP growth
effectiveness of EPZ: export growth

variation in the establishment of special zones across

time and space
location-sector level: sectors treated as priorities
post-EPZ vs. pre-EPZ, targeted vs. non-targeted
city-year, sector-year and city-sector fixed effects

54
 Main contribution II
policy effectiveness and local comparative
advantage
products more similar to the local export basket have
an export advantage (Poncet and de Waldemar, 2013)
policy effectiveness rely on local comparative
advantage
literature that cautions against one-size-fits-all policy
that disregards local circumstances (Kali et al., 2013; Lin,
2012; Cai et al., 2011)
Main findings:
policy effectiveness depends on local comparative
advantage

55
 2 Export Processing Zones
Firms in EPZs:
no taxes on utilities and their activities are free of
value-added and excise taxes
advantageous land prices
possible direct subsidies
more efficient business environment
customs typically provide a 24-hour service within
these zones
Sectoral focus of EPZs
officially listed as being priorities
Electronics; varies across zones
56
 Channels:
FIEs
spillovers to firms outside the EPZ
input-output linkages
technology transfer from FIEs to domestic firms
re-employment of skilled labor from EPZ to non-EPZ firms
(Blonigen and Ma, 2010; Hale and Long, 2011)
benefits from the export experience of multinationals
(Li and Liu, 2014; Mayneris and Poncet,2015)
information externalities
cost-sharing opportunities
joint actions in export markets

57
 3 Data and indicators
57 EPZs
the first wave of EPZs in each location (47)

58
 priority sectors
Chinese GBT industry classification (3-digit level)
Classification Notes of National Economic
Industries
Classifications of Strategic Emerging Industries
Classifications of Electronic Information Products
fully accurate match and not fully accurate match

59
 Export
ASIF: 1998-2007
aggregate to: 3-digit sector level for each location
47 locations, 158 sectors
Sector relatedness
Revealed comparative advantages (RCAs) (Balassa,
1965)
RCA in i
bilateral proximity between two goods
Pr(i|j): # RCA in i and j / # RCA in i
Pr(j|i): # RCA in i and j / # RCA in j

60
 Proximity :

Density for industry k in locality l

sector with large Density is densely-connected to

the local productive structure

61
4 Empirical strategy

62
5 Results

63
 6 Conclusion
no unconditional export benefits from the EPZ policy

greater positive export repercussions with the

denser the links between the targeted sector and the
local productive structure


70






-

71

GDP

+

72

GDP

GDP

73


74


75


76