Urban spatial structure and firm growth: Evidence from China

Abstract

In the context of China's continued promotion of new urbanization and development of urban land, it is significant for China to create high-quality urban spatial structures with a concentration of the main center and a diversion of other areas in shaping spatial new drivers of economic growth. We measure urban spatial structures in China using land plot location and floor area ratio (FAR) information. Then, we explore how the urban spatial structure affects firm growth. We find that a high-quality urban spatial structure can promote firm growth by reducing firms’ average costs and increasing firms’ total factor productivity. Further analysis reveals that the spatial structures formed by various activities have different effects on firm growth. High-quality spatial structures only promote firm growth in monocentric cities. Government intervention under growth competition and fiscal revenue maximization significantly weaken the firm growth effect of high-quality urban spatial structures. Our findings help policymakers improve urban land use policies with location characteristics and promote firm growth.