Empowering Cities : Good for Growth? Evidence from China
This paper utilizes a countrywide, county-to-city upgrade in the 1990s to identify whether extending the powers of urban local governments leads to better firm outcomes. The paper hypothesizes that since local leaders in newly-promoted cities have...
| Main Authors: | , |
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| Format: | Publications & Research |
| Language: | English en_US |
| Published: |
World Bank Group, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/02/23984231/empowering-cities-good-growth-evidence-china http://hdl.handle.net/10986/21448 |
| Summary: | This paper utilizes a countrywide,
county-to-city upgrade in the 1990s to identify whether
extending the powers of urban local governments leads to
better firm outcomes. The paper hypothesizes that since
local leaders in newly-promoted cities have an incentive to
utilize their new administrative remit to maximize gross
domestic product and employment growth, there should be
improvements in economic outcomes. The analysis finds that
aggregate firm-level outcomes do not necessarily improve
after county-to-city graduation. However, it does find that
state-owned enterprises perform better post-graduation, with
increased access to credit through state-owned banks as a
possible explanation for the improvement in performance. The
most important finding is that newly-promoted cities with
high capacity generally produce better aggregate firm
outcomes compared with newly-promoted cities with low
capacity. The conclusions are twofold. First, in terms of
access to credit, the paper provides evidence that relaxing
credit constraints for firms could lead to large increases
in firm operation and employment. Second, increasing local
government's administrative remit is not enough to lead
to better firm and economic outcomes; local capacity is of
paramount importance. |
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