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Industrial parks and urban growth: a political economy story in China

In: Handbook of Real Estate and Macroeconomics

Author

Listed:
  • Matthew E. Kahn
  • Jianfeng Wu
  • Weizeng Sun
  • Siqi Zheng

Abstract

Over the last 30 years, the Chinese government has invested in new industrial parks with the intent of stimulating urban economic growth. The central government delegates the site selection decision to provincial leaders. A principal-agent issue arises because the central government prioritizes efficiency and equity criteria while the provincial leader may allocate such place based investments to reward socially connected mayors. We present a revealed preference test of industrial park site selection and document the willingness of China's provincial leaders to sacrifice economic development in order to reward social connections. We examine the causes and consequences of this misallocation of capital.

Suggested Citation

  • Matthew E. Kahn & Jianfeng Wu & Weizeng Sun & Siqi Zheng, 2022. "Industrial parks and urban growth: a political economy story in China," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 14, pages 359-370, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19335_14
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    Keywords

    Asian Studies; Economics and Finance; Urban and Regional Studies;
    All these keywords.

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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