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How does people’s liberation army related business closure affect the local economy?

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  • Han, Haozhe
  • Zhang, Shuo

Abstract

People’s Liberation Army (PLA) related business was rampant in China in the 1980s and 1990s, and they significantly disrupted the local economy. However, due to limited data about PLAs, this issue is rarely investigated and thus the negative impact is hardly measured. In this paper we introduce a new proxy for measuring the approximate level of PLA related business in a specific city, PLA hospital score, to identify cities that are more affected by PLA related business closure. We then employ a difference-in-differences (DID) framework and show that PLA related business closure does bring positive effects to China’s local economy, about a 2% increase in GDP growth per year. We also find that this effect is more significant in cities with median economic size and cities that rely more on secondary and tertiary sectors. We finally provide a possible channel of this effect, which mainly works through providing a more efficient and competitive market to local private firms as well as an investment-friendly environment that attracts foreign investments.

Suggested Citation

  • Han, Haozhe & Zhang, Shuo, 2023. "How does people’s liberation army related business closure affect the local economy?," China Economic Review, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:chieco:v:77:y:2023:i:c:s1043951x22001481
    DOI: 10.1016/j.chieco.2022.101890
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    More about this item

    Keywords

    PLA related business; PLA hospitals; Difference in differences; China economy;
    All these keywords.

    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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