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Combining rich firm and administrative data, this paper examines the incidence and effectiveness of a prominent place-based policy in China: special economic zones. Establishing zones is found to have had a positive effect on capital investment, employment, output, productivity, and wages, and to have increased the number of firms in the designated areas. Net entry plays a larger role in generating those effects than incumbents. The special zone program’s net benefits over three years are estimated to amount to about US15. 62 billion. Capital-intensive industries benefit more than labor-intensive ones from the zone programs. (JEL O16, O18, O25, P25, R23, R32, R58)
Lu et al. (Tue,) studied this question.