# 16-021/VIII (2016-04-01)

Hans Koster, VU University Amsterdam, the Netherlands, and London School of Economics, United Kingdom; Fang Fang Cheng, Utrecht University, the Netherlands; Michiel Gerritse, University of Groningen, the Netherlands; Frank van Oort, Erasmus University Rotterdam, and Utrecht University, the Netherlands
place-based policies, transitional economies, science parks, productivity
JEL codes:
H2, R3, R5

We analyse the economic impacts of place-based policies that aim to enhance economic development by stimulating growth and productivity of firms in designated areas. We use unique panel data from China with information on manufacturing firms’ production factors, productivity and location, and we exploit temporal and spatial variation in place-based interventions due to the opening of science parks in the metropolitan area of Shenzhen. The identification strategy enables us to address the issues that (i) science parks are located in favourable locations and that (ii) high-productivity firms sort themselves in science parks. We find that productivity is approximately 15-25 per cent higher due to the policies. The results also show that local wages have increased in science parks. Weaker evidence suggests that displacement effects are sizeable.