Place-based policies: first-mover advantage and persistence

Abstract

Researchers have explored various place-based policies for promoting economic growth, but the long-term effects and drivers of successful policies have not been thoroughly studied. In this article, we first document significant heterogeneity in growth trends between early and late national development zones in China. Then, we develop a theoretical framework to analyze the influence of their establishment timing on the spatial equilibrium dynamics. Using new archival data and novel empirical strategies, we demonstrate that the early zones consistently have higher firm entries, innovation, and labor pooling. These results highlight the importance of agglomeration for the long-term success of place-based policies.