Do Place-Based Policies Promote Local Innovation and Entrepreneurship?

Abstract

This paper explores how a prominent place-based policy in China, the national high-tech zones, affects local innovation output and entrepreneurial activities. Relying on plausible exogenous variation in place-based policies caused by staggered establishments of national high-tech zones, we find that the establishment of national high-tech zones has positive effects on local innovation output and entrepreneurial activities. A number of additional tests suggest that the effects appear causal. Access to finance, reductions in administrative burdens, and talent cultivation are three plausible underlying channels through which national high-tech zones positively affect local innovation and entrepreneurship. Our paper sheds new light on the debate about the real effects of place-based government policies.