Do city–county mergers in China promote local economic development?1. Issue 3 (24th February 2017)

• Record Type: Journal Article
• Authors: Tang, Wei; Hewings, Geoffrey J.D.
• Is Part Of: Economics of transition. Volume 25:Issue 3(2017:Jul.)
• Page Start: 439
• Page End: 469
• Publication Date: 2017-02-24
• Subjects: Municipal merger -- city–county merger -- economic development -- agglomeration economies -- China; Europe, Eastern -- Economic policy -- Periodicals; Europe, Central -- Economic policy -- Periodicals; Capitalism -- Europe, Eastern -- Periodicals; Capitalism -- Europe, Central -- Periodicals; 338.9405
• DOI: 10.1111/ecot.12118
• Languages: English
• ISSNs: 0967-0750

Abstract

Abstract: Municipal mergers have become a worldwide phenomenon in the past few decades, primarily advanced to exploit economies of scale. While most evaluations of municipal mergers have focused on the efficiency of local public goods provision, it is rare in the literature to explore how such mergers promote economic growth in a developing country context. This research investigates the economic consequences of a policy experiment of city–county mergers ( che xian she qu ) in China during the period 2000–2004. Using comprehensive datasets at city, county and firm levels, we present evidence that the merger significantly increases local economic development, and the magnitude of the effect depends on local endowments related to agglomeration forces. The results are robust to a number of different model specifications. We further verify that improved transport infrastructure and urban agglomeration economies after merger are potential contributors to the positive merger effects.