- , , , and , “The birth of edge cities in China: Measuring the effects of industrial parks policy,†Journal of Urban Economics, 2017, 100, 80–103.
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, Johannes Van Biesebroeck, and Yifan Zhang, “Challenges of working with the Chinese NBS firm-level data,†China Economic Review, 2014, 30 (C), 339–352.
- , Report on the First Five-Year Plan for the Development of the National Economy— At the Second Meeting of the First National People’s Congress on July 5–6, 1955 [in Chinese], Beijing: National Committee of the Chinese People’s Political Consultative Conference, July 1955.
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, Trevor Tombe, and Xiaodong Zhu, “Factor market distortions across time, space and sectors in China,†Review of Economic Dynamics, 2013, 16 (1), 39–58.
- (a) Transport network in 1948. (b) Access to natural resources (coal).
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- A concern with the Third Front Movement is that, although second-front industries, and the “156†plants in particular, were largely unaffected, massive investments were directed toward other provinces, which may have hurt the economic environment of the Million-Rouble plants. To check whether Third Front investments diverted resources away from the treated counties and explain their decline in the second period, we use the list of Third Front province from Fan and Zou (2015). Table A3, Panel G, controls for concurrent policies and includes an indicator variable equal to 1 if a county belongs to a such a province and 0 otherwise. We find that this control does not alter the results.
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- A Figures and tables Figure 1. Transport network in 1948 and access to natural resources.
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- A total of 150 plants were complete and operational by 1960 (Dong and Wu, 2004). Because 156 projects had initially been touted and this program was held up as the cornerstone of Chinese economic development, speeches and reports continued to refer to the “156†program.
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- “156†plants close to allied airbases. The 1950 Treaty of Friendship and Alliance indeed assured them that the Soviet Union would defend China in case of foreign aggression. Bo, who was personally involved in plant location decisions, reports that senior military officials took part in the deliberations: “when examining plant locations, [they] would place plant sites on a mapâ€, along with all U.S. bases in Taiwan, South Korea and Japan, to determine “which types of American planes could attack which sites†(Bo, 1991).
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- Access to resources Travel cost to coal mines Distance to coal mines following the 1948 railroad network.
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- After Stalin’s death, ideological and political tensions started to rise with Khrushchev’s condemnation of his predecessor’s crimes in 1956 and his policy of “peaceful coexistence with the West.†As China kept encouraging a Stalin-like cult of Mao’s personality, experimented with disastrous grass-roots industrialization during the Great Leap Forward—the polar opposite of orthodox Soviet central planning,— and pursued aggressive foreign policy, the normalization of the Soviet regime and prospect of deÌtente between the two superpowers could only worry Chinese leaders.
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- aid component. Technological cooperation implied free transfers of blueprints and documents, the monetary value of which should not be downplayed. The U.S.S.R. also granted China product manufacturing patents that alone represented a value of about 3–3.5 million roubles (Dong, 1999).
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Aitken, Brian J and Ann E Harrison, “Do domestic firms benefit from direct foreign investment? Evidence from Venezuela,†American Economic Review, 1999, 89 (3), 605– 618.
Alder, Simon, Lin Shao, and Fabrizio Zilibotti, “Economic reforms and industrial policy in a panel of Chinese cities,†Journal of Economic Growth, 2016, 21 (4), 305–349.
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- Bergin, Bob, “The Growth of China’s Air Defenses: Responding to Covert Overflights, 1949–1974,†Studies in Intelligence, June 2013, 57 (2), 19–28.
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Bloom, Nicholas, Mark Schankerman, and John Van Reenen, “Identifying technology spillovers and product market rivalry,†Econometrica, 2013, 81 (4), 1347–1393.
- Bo Yibo, a prominent leader personally involved in the design of the “156†program, outlines four main criteria guiding the location decision process (Bo, 1991). Plants had to be built close to natural resources to reduce transportation costs and avoid waste. Places easily accessible through the road and railway network should be favored, so as to reach down- and upstream firms and end-consumer markets at a lower cost. Regions with no pre-existing industrial base would be given priority. Conditional on meeting these first criteria, state-of-the-art Soviet-sponsored plants were to be built out of the reach of U.S. and Taiwanese bombers.
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- Bo, Yibo, Review of Several Major Decisions and Events [Ruogan Zhongda Juece yu Shijian de Huigu], Beijing: The Chinese Communist Party School Press [Zhonggong Zhongyang Dangxiao Chuban She], 1991.
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Brandt, Loren, Gueorgui Kambourov, and Kjetil Storesletten, “Firm Entry and Regional Growth Disparities: the Effect of SOEs in China,†Technical Report May 2016.
Buera, Francisco J. and Yongseok Shin, “Financial Frictions and the Persistence of History: A Quantitative Exploration,†Journal of Political Economy, 2013, 121 (2), 221–272.
Busso, Matias, Jesse Gregory, and Patrick Kline, “Assessing the Incidence and Efficiency of a Prominent Place Based Policy,†American Economic Review, 2013, 103 (2), 897–947.
- Characteristics of the plants The industrial cooperation focused on heavy industry but nonetheless spanned a wide range of sectors. Table 2 summarizes the distribution of the plants by industrial sector. A majority of plants operated in the heavy, extractive and energy sectors. China had the experience and capacity to build most light-industry factories, so that Soviet cooperation concentrated on sectors that China lacked the skills and wherewithal to develop. Military industries made up a fifth of the plants, reflecting China’s two main concerns in the 1950s: economic development and national security. Final goods were also produced, in particular aircraft, machinery and weapons. The “156†program was China’s first big push in the electronic industry.
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Chen, Ying, J. Vernon Henderson, and Wei Cai, “Political favoritism in China’s capital market and its effect on city sizes,†Journal of Urban Economics, 2017, 98 (C), 69–87.
- Chinese Academy of Social Sciences and State Archives Administration, Selected Economic Archives of the People’s Republic of China, 1953–1957: Volume on Fixed Assets and Construction [in Chinese], Beijing: China Price Press, 1998.
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- Chinitz, Benjamin, “Contrasts in Agglomeration: New York and Pittsburgh,†The American Economic Review, 1961, 51 (2), 279–289.
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Ciccone, Antonio, “Input chains and industrialization,†The Review of Economic Studies, 2002, 69 (3), 565–587.
- Construction Investment Sector Number Start End Planned Actual Aviation 14 1953.9 1957.3 7271 7204 Chemical 7 1955.3 1958.4 15291 15474 Coal mining 25 1954.3 1958.5 5323 5832 Electronic 10 1955.5 1957.9 5661 4752 Iron and Steel 7 1953.9 1959.0 78361 84586 Machinery 23 1954.8 1958.2 9972 10336 Nonferrous Metals 13 1955.1 1959.0 15018 15451 Powerplants 23 1954.0 1957.9 13039 9023 Weapons 16 1955.1 1958.4 13533 12262 Other 12 1955.3 1959.3 11751 12513 Notes: Other industries are shipbuilding, pharmaceutical and paper-making industries. The average planned investment by factory was about 100,000,000 yuan, which amounts to 15,000,000 Soviet roubles in 1957 ($120,000,000 in 2010 U.S. dollars). Note that some projects were not completed in 1960, and thus abandoned. Some planned projects had not yet been awarded a definitive location, which prevents us from using them as a control group. Table 3. Descriptive statistics (control and treated counties, weighted by matching weights).
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- Crescenzi, Riccardo, AndreÌs RodrıÌguez-Pose, and Michael Storper, “The territorial dynamics of innovation in China and India,†Journal of Economic Geography, 2012, 12 (5), 1055–1085.
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- Dong, Zhikai, “On the Establishment of the “156 Program†[in Chinese],†Researches in Chinese Economic History, 1999, 4, 93–107.
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Duranton, Gilles and Diego Puga, “Nursery cities: Urban diversity, process innovation, and the life cycle of products,†American Economic Review, 2001, 91 (5), 1454– 1477.
- Eckstein, Alexander, China’s Economic Revolution, Cambridge: Cambridge University Press, 1977.
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- End of the First Plan and Sino-Soviet split The Sino-Soviet cooperation survived beyond the First Five-Year Plan: 102 of the “156â€-program plants became operational during the Second Five-Year Plan. This was not so much due to delays as to the original agreements between Beijing and Moscow, most of the plants were to be completed after 1957. Two similar agreements were signed on August 8, 1958 and February 7, 1959 to expand Sino-Soviet cooperation and build 125 additional large plants, which were to be built during the Second and Third Five-Year Plans.
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- Factory (1) (2) (3) Penalized distance 0.143 0.148 0.261 (0.039) (0.039) (0.044) Observations 430 430 430 Propensity bins No Yes Yes Extended controls No No Yes Notes: Standard errors are clustered at level of 4-degree × 4-degree cells. The unit of observation is a county (Administrative level 3). Penalized distance is the normalized distance to the main military U.S. and Taiwanese airfields penalized by proximity to U.S.S.R. and North Korean airfields. Extended controls include all matching controls, i.e., travel cost to resources (coal, coke, ore), proximity to a rail hub, whether the county is a provincial capital, population in 1953 (log), county area (log), and additional controls, i.e., travel cost to major ports (through the river network), proximity to Ming-dynasty courier stations, cities in 1900, distance to military airfields) and penalized distance to enemy airfields in 1964. Table 2. The 156 Million-Rouble Plants: sector, construction period and initial investment.
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Falck, Oliver, Christina Guenther, Stephan Heblich, and William R. Kerr, “From Russia with love: the impact of relocated firms on incumbent survival,†Journal of Economic Geography, May 2013, 13 (3), 419–449.
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Fang, Lily, Josh Lerner, Chaopeng Wu, and Qi Zhang, “Corruption, Government Subsidies, and Innovation: Evidence from China,†Working Paper 25098, National Bureau of Economic Research September 2018.
- Figure 6. Illustration of the treatment effect over time (employment share in industry and share of urban area)). −.2 0 .2 .4 Employment share in industry 1980 1990 2000 2010 Year (a) Employment share in industry −.05 0 .05 .1 Share of urban area 1990 1995 2000 2005 2010 Year (b) Share of urban area Notes: This Figure displays the treatment effect for the employment share in industry (1982, 1990, 2000, 2010) and the share of urban area in the county, as computed using impervious surface recognition (1993, 1996, 1999, 2002, 2005, 2008).
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- Figure 7. Illustration of the treatment effect over time (employment, public ownership, share of young firms, number of utility patents). 0 .4 .8 Employment in the other establishment 1998 2000 2002 2004 2006 2008 Year (a) Employment 0 .1 .2 .3 Publicly−owned establishment 1998 2000 2002 2004 2006 2008 Year (b) Public −.2 −.1 0
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- Figure B2. Entrance of the main Ansteel group plant in 2016.
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- Fogel, Robert, Railroads and American economic growth: Essays in econometric history, Baltimore, MD: Johns Hopkins University Press, 1964.
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- In 1953, China’s aviation was non-existent, which explains the importance of Soviet military protection36 The People’s Liberation Army only developed an aviation thanks to Soviet support and because of the pressing needs of the Korean War.
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- It covers the period 1998–2007, for which the dependent variables are available. For each variable, the table displays the share of such factories, e.g., Employment is the share of those factories in local manufacturing employment (1992–2008). Revenue refers to total sales. It is available in 1996–2007, except for 1997. Compensation (1996– 2008, except for 1997) combines wages, housing subsidies, pension and medical insurance, and welfare payable.
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- Location decisions One of the main tasks of the Soviet experts was to help determine the optimal location for the plants (Li, 1955b).
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Mayneris, Florian, Sandra Poncet, and Tao Zhang, “Improving or Disappearing: Firm-Level Adjustments to Minimum Wages in China,†IRES Discussion Paper 2016-27 2016.
- MPK, TFP ) is the logarithm of firm-specific labor productivity (resp. capital, total factor productivity) as computed in Imbert et al. (2018). Public, Small and Young are dummies equal to 1 if the firm is a state-owned enterprise, is smaller than 100 employees and younger than 3 years. All variables of Panel C are dummies equal to 1 if the associated accounting variable is positive.
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- Naughton, Barry, The Chinese Economy: Transformation and Growth, Cambridge, MA: MIT Press, 2007.
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Neumark, David and Helen D. Simpson, “The Handbook of Regional and Urban Economics,†in Gilles Duranton, J.V. Henderson, and William Strange, eds., The Handbook of Regional and Urban Economics, Elsevier/Academic Press, 2015.
Ngai, L. Rachel and Christopher A. Pissarides, “Structural Change in a Multisector Model of Growth,†American Economic Review, March 2007, 97 (1), 429–443.
- One such jituan is Ansteel, which evolved from the Anshan Iron and Steel Company and is now listed on the Shenzhen and Hong Kong Stock Exchanges. Figure B2 considering U.S.S.R. and North Korean as neutral rather than as threats. We also find the same rise-and-pattern if we control for vulnerability to U.S. or Taiwanese bombings in 1990, i.e., following the collapse of the Soviet Union and using the locations of airbases in that year. (Results available upon request.) displays a picture of the main plant in 2016.
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- Only 15 plants closed down, and the decline of treated counties between 1982 and 2010 is not due to Million-Rouble plants going bust (see Appendix Table A3). About a third of the “156†plants evolved into large, diversified industrial groups (jituan).
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- Parameterization We set the key parameters based on declassified CIA technical intelligence documents from the early 1950s. Such documents show the information available to U.S. intelligence on Soviet military technology, obtained from spies and through the reverse-engineering of fighter jets downed during the Korean War. We assume that the Soviet similarly derived information about U.S. military technology, and expected the Americans to know theirs equally well. In keeping with the 1950 Treaty, Soviet military advisers shared their information with their Chinese counterparts, in particular to determine the location of the Million-Rouble plants.
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Pierce, Justin R and Peter K Schott, “The surprisingly swift decline of US manufacturing employment,†American Economic Review, 2016, 106 (7), 1632–62.
- prehensive economic and scientific cooperation that spanned China’s First and half of its Second Five-Year Plans (1953–1957 and 1958–1962, respectively).
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- products that China had never produced in history†(Li, 1955a), e.g., the Luoyang Truck Factory which produced China’s first truck. Figure B1 shows a view of what is now YTO Group Corporation. Figure B1. Contemporary view of the Luoyang Truck Factory. Note: This figure reproduces a contemporary view of the Luoyang Truck Factory, now YTO Group Corporation. In the foreground, we can see the buildings of the Luoyang Truck Factory, constructed as part of the “156†program.
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Rawski, Thomas, Economic Growth and Employment in China, Oxford: Oxford University Press, 1979.
- Rong, Xinchun, “On the Development and Changes of the Shipping Business in New China (1949–2010) [in Chinese],†Researches in Chinese Economic History, 2012, 2, 127–137.
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- Schweiger, Helena, Alexander Stepanov, and Paolo Zacchia, “The long-run effects of R&D place-based policies: evidence from Russian science cities,†Technical Report, European Bank for Reconstruction and Development June 2018.
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Shirotori, Miho, Bolormaa Tumurchudur, and Olivier Cadot, Revealed factor intensity indices at the product level, Vol. 44, UN, 2010.
- Sino-Soviet relations were strained in the late 1950s by rapid ideological divergence.
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- Source: YTO Group Corporation website [http://www.yituo.com.cn/; accessed September 11, 2018].
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- Sources: CIA technical intelligence study No. 102-AC-52/14-34, “Soviet Operational Interceptor Aircraft†(3 September 1952). The resulting vulnerability measure is mapped in the right panel of Figure 4.
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- Table 4. Factories and employment, output and urbanization in 1982.
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- Table 5. Factories and employment, output and urbanization in 2010.
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- Tang, Yanyan, “An Analysis of the Advantage of Backwardness Based on the Construction of the “156†Program [in Chinese],†Theory Monthly, 2009, 20.
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- The 1960 split however severely curtailed this second wave of investments. The “156†plants thus constitute the only complete, large-scale industrialization program carried out in China thanks to Soviet cooperation.
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- The cooperation between Communist China and the Soviet Union assumed two main aspects: scientific and economic, both embodied in the “156†program. Soviet experts would be dispatched to China to advise Chinese planners. At the peak of the Sino-Soviet alliance, 20,000 experts were present in China (Zhang, 2001; Wang, 2003). Although Soviet experts were involved in all aspects of central planning, in particular during the First Five-Year Plan, their presence was the most crucial for the “156†program. They were responsible for the design and construction of the plants, and they also trained Chinese cadres and workers to run the factories and operate and maintain equipment. To ensure the sustainability of the program, 80,000 Chinese students were sent to Soviet universities and technological institutes, with the perspective of a position in one of the plants upon return.
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- The Million-Rouble plants brought about a large technological shift. The sheer size of the investments and their focus on industry was meant to transform China from a subsistence-farming to an industrial economy. The average plant constituted an investment of 130,000,000 yuan or 19,500,000 Soviet roubles in 1957, which is the equivalent of $156,000,000 in 2010 U.S. dollars. Some plants “produced many new 33 Construction work began on average in 1954 and was completed in 1958. Mean start and end dates by sector are provided in Table 2.
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- The number of observation is reported between brackets. The unit of observation is a county (Administrative level 3). The instrument is the distance to the main military U.S. and Taiwanese airfields penalized by the proximity to U.S.S.R. and North Korean airfields. All specifications include (i) propensity score bins (except Panel A which includes province-fixed effects instead), (ii) matching controls, i.e., travel cost to resources (coal, coke, ore), proximity to a rail hub, whether the county is a provincial capital, population in 1953 (log), county area (log), and (iii) the additional controls, i.e., travel cost to major ports (through the river network), proximity to Ming-dynasty courier stations, cities in 1900, distance to military airfields) and penalized distance to enemy airfields in 1964. Table A4. Sensitivity to other measures of economic development.
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- The Sino-Soviet split materialized in 1960 when Soviet experts and Chinese students were suddenly repatriated. Incomplete projects that were not viable were abandoned, while future investments were canceled. Six of the “156†plants were not operational and could not be completed without Soviet support and were closed.
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- The split induced a dramatic shift in China’s alliances and conception of national security. The sites that had been carefully selected because they could benefit from Soviet or North Korean protection now appeared vulnerable. Subsequently, Mao launched in 1964 the “Third Front Movement†(Sanxian jianshe), a new wave of industrial investments (mostly in heavy industry) directed at remote inland areas.
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- These measures are computed in the same way, except that the 1953 vulnerability models the protection afforded by Soviet and North Korean allies, while the 1964 vulnerability considers Soviet and North Korean airbases as threats, reflecting the geopolitical environment after the Sino-Soviet split in 1960.
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Tombe, Trevor and Xiaodong Zhu, “Trade, Migration and Productivity: A Quantitative Analysis of China,†June 2015.
- Travel cost to coke Distance to coke deposits following the 1948 railroad network. Topographic controls Slope (degrees) Average slope in the county. Strong slope Dummy equal to 1 if the average slope is greater than 10 degrees. Elevation (mean; m) Average elevation in the county (in meters). Elevation (st. dev.; m) Standard deviation of elevation in the county (in meters). Market access controls Travel cost to ports Dummy equal to 1 for a county whose centroid is lying within 500 km of a port following navigable waterways, and 0 otherwise. Proximity to courier stations Dummy equal to 1 if the county centroid is located within 10 kms of the closest Ming-dynasty courier station.
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- Travel cost to ore Distance to ore deposits following the 1948 railroad network.
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- Value added is available between 1998 and 2007, 2004 excluded. Profits are defined as value added minus total compensation. They are available from 1998 to 2007, except for 2004. The unit of observation is a prefecture × year × industry (2-digit, Chinese Industrial Classification). 41 Not all “156†factories have been matched to firms in the “above-scale†data. These figures are thus lower bounds. Productivity Table D2 compares the Million-Rouble plants with other firms within treated counties along various measures of productivity. As productivity may be systematically correlated with firm size, all regressions control for employment. We further include county, year and two-digit industry fixed effects in all specifications.
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- VARIABLES Description Population Population (1953) Total population of the county in the First Chinese Population Census (1953).
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- VARIABLES Participation Illiteracy rate Male/female ratio Panel A: Additional variables (1982) Factory -.040 -.163 -.015 (.022) (.041) (.017) [430] [430] [430] VARIABLES Agriculture Industry Services Panel B: Precise sectoral decomposition (employment shares, 1990) Factory -.267 .126 .136 (.067) (.039) (.034) [430] [430] [430] VARIABLES Agriculture Industry Services Panel C: Precise sectoral decomposition (employment shares, 2010) Factory .042 -.129 .086 (.060) (.052) (.033) [430] [430] [430] VARIABLES Nightlights (1993) Nightlights (2012) Urban (1993) Panel D: Satellite data Factory 1.21 .524 .043 (.336) (.258) (.016) [430] [430] [423] Notes: Standard errors are clustered at level of 4-degree × 4-degree cells, and are reported between parentheses.
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- VARIABLES Population GDP p.c. Population GDP p.c. (1982) (1982) (2010) (2010) Panel A: Local identification Factory .032 .420 .105 .040 (.075) (.097) (.088) (.108) [1,540] [1,540] [1,540] [1,336] Panel B: Matching with extended variables Factory .067 .793 .183 -.282 (.107) (.202) (.084) (.193) [407] [407] [407] [312] Panel C: Matching with fewer variables Factory .137 .753 .113 .066 (.113) (.229) (.107) (.373) [426] [426] [426] [327] Panel D: One-to-one matching Factory .223 .764 .288 .002 (.098) (.205) (.134) (.186) [222] [222] [222] [158] Panel E: Matching with larger exclusion zone Factory .114 .641 .197 -.305 (.083) (.267) (.143) (.196) [236] [236] [236] [173] Notes: Standard errors are clustered at level of 4-degree × 4-degree cells, and are reported between parentheses.
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von Ehrlich, Maximilian and Tobias Seidel, “The Persistent Effects of Place-Based Policy: Evidence from the West-German Zonenrandgebiet,†American Economic Journal: Economic Policy, 2018, 10 (4), 344–74.
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Wang, Jin, “The economic impact of special economic zones: Evidence from Chinese municipalities,†Journal of development economics, 2013, 101, 133–147.
- Wang, Qi, “An Analysis of the “156 Program†and Sino-Soviet Relations in the 1950s [in Chinese],†Contemporary China History Studies, 2003, 10, 110–116.
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- We further rely on the NBS above-scale survey (1992–2008) to shed light on the evolution of the Million-Rouble plants—see Appendix D for a description of the procedure followed to match plants with firms and a comparison of the MillionRouble plants with other firms in the same county. We find that (i) most plants are still active today (94 of the 125 Million-Rouble plants that operated in the manufacturing sector could be identified) and (ii) they are on average four times as productive as other above-scale firms (controlling for size; see Table D1 and the detailed discussion in Appendix D).
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- We see that some areas that were protected by the Soviet and North Korean allies, such as the northeast and to a lesser extent counties bordering Mongolia, are now extremely vulnerable. Central provinces, removed from both U.S./Taiwanese and Soviet bombing threats, are now the safest. This is where Third Front Movement investments were concentrated (see Fan and Zou, 2019).
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- Xia, Fei, “The Third Front Movement: One of Mao Zedong’s Major Strategic Decisions [in Chinese],†Over the Party History, 2008, 1, 45–48.
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- Xiao, Xiang, Study of the Role of Government in China’s Industrialization [in Chinese], Economic Science Press, 2014.
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- Young establishment 1998 2000 2002 2004 2006 2008 Year (c) Young −.4 −.2 0 .2 Number of patents 1998 2000 2002 2004 2006 2008 Year (d) Utility patents Notes: This Figure displays the treatment effect for establishments size and characteristics (1998–2008), and patenting behavior (1998–2007). Figure 8. Illustration of spillovers with treatment heterogeneity. Table 1. Factories and penalized distance to U.S./Taiwanese airfields and bases.
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- Zhang, Jiuchun, “A Study of the “156 Program†of Industrial Construction in the 1950s [in Chinese],†Journal of Engineering Studies, 2009, 1, 213–222.
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- Zhang, Shuguang, Economic Cold War: America’s Embargo against China and the Sino-Soviet Alliance, 1949–1963, Stanford, CA: Stanford University Press, 2001.
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Zheng, Siqi, Weizeng Sun, Jianfeng Wu, and Matthew E. Kahn, “The birth of edge cities in China: Measuring the effects of industrial parks policy,†Journal of Urban Economics, July 2009, 100, 80–103.