Lighting up local economies: evidence from China’s return-to-hometown entrepreneurship pilot

We evaluate the economic effects of China’s Return-to-Hometown Entrepreneurship (RTH) pilot using county-level VIIRS night-time lights aggregated to the semiannual frequency from 2013 to 2020. Night-time luminosity provides an objective and spatially consistent proxy for county-level economic activity. Exploiting the staggered rollout of the pilot across counties, we implement a multi-period difference-in-differences design with county and time fixed effects and controls. We find that policy exposure significantly increases county brightness. Event-study estimates show no evidence of differential pre-trends and indicate a gradual post-adoption build-up combining a modest immediate rise with persistent subsequent acceleration. The effects are strongest in counties with middle levels of baseline development. Controlling for distance-weighted spillovers from neighboring treated counties leaves the main effect largely unchanged. Overall, the evidence suggests that the RTH pilot strengthened local economic dynamism.