Title: Protectionism and Regional Specialization: Evidence from China's Industries
Reference Number: 1040
Publication Date: February 2002
JEL Classifcation: F1, R12, P2
Author(s):

Chong-En Bai, Yingjuan Du, Zhigang Tao
The University of Hong Kong

Sarah Tong
Hong Kong Institute of Economics and Business Strategy

Abstract:

This paper investigates the determinants of regional specialization using a panel data set covering 32 two-digit industries in 29 Chinese regions over a period of 13 years (1985-1997), paying particular attention to the role of regional protectionism. It is found that there is less geographic concentration in industries where past profit and/or tax margins are high and where the share of employment by the state-owned enterprises is high, reflecting stronger local government protection of these industries. The evidence also supports the external-economies theory and the increasing-returns-to-scale theory, but not the resource-endowment theory, of regional specialization. Finally, the overall time trend of regional specialization of China's industries is found to have reversed an early drop in the mid 1980s, and registered a significant increase in the later years.

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Key words: protectionism, regional specialization, scale economy, external economy, resource endowment

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Last modified: 07/25/2002