Social Sciences in China, 2020

Vol. 41, No. 4, 2020

The Consumption-Driven Effect of Place-based Industrial Policy: An Empirical Study Based on Development Zone Policy

(Abstract)

Sun Weizeng, Wu Jianfeng and Zheng Siqi

Can the development zone policy that pioneered Chinese industrialization energize the consumption of urban residents and become an important means of achieving the coordinated development of industrialization and urbanization? We used the policy impact of upgrading provincial development zones to conduct empirical research on the consumption-driven effect of development zone policy with the Difference in Difference (DID) model. Our findings show that the upgrading of development zones is significant in raising urban residents’ total consumption, personal consumption, housing consumption and expenditure on children’s education. This is mainly due to the increase in productivity brought about by the upgrading policy. However, in cities that have more stringent household registration (hukou) systems, impose tougher home purchase restrictions (HPR) on the floating population and have less social harmony, the labor force is less willing and less able to consume, making it hard to expand domestic demand.

Keywords: place-based industrial policy, development zone policy, upgrading development zones, consumption-driven effect, urbanization quality