Spillovers across industries and regions in China’s regional economic diversification

ABSTRACT

Industrial diversification depends on spillovers from related industries and nearby regions, yet their interaction remains largely unclear. We study economic diversification in China during the period 1990–2015 and present supportive evidence on both spillover channels. We add to the literature by showing that these two channels behave as substitutes when explaining new entries and exits, and by using acceleration campaigns of high-speed rail to address some endogeneity concerns with regional spillovers. Our findings confirm the role of relatedness and geographical distance in the diffusion of economic capabilities and support the idea that improvements in transportation can facilitate the diffusion of productive capabilities.

KEYWORDS:

• economic development
• industrial structure
• economic complexity
• spillovers
• high-speed rail

JEL:

• O11
• O47
• O53
• R11

ACKNOWLEDGEMENTS

The authors would like to acknowledge the anonymous reviewers for their insightful comments and constructive suggestions. The authors thank Haixing Dai, Mary Kaltenberg, Yiding Liu, Zhihai Rong, H. Eugene Stanley, Qing Wang and Dan Yang for helpful comments on earlier versions of the paper, and Yingcheng Li for help on accessing the enterprise data.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. See http://www.csrc.gov.cn/pub/csrc_en/laws/overRule/Announcement/201302/W020130225570141407159.doc.

Additional information

Funding

The authors acknowledge support from the National Natural Science Foundation of China [grant number 11975071], the MIT Media Lab Consortia, the Masdar Institute of Technology, and the Artificial and Natural Intelligence Toulouse Institute (ANITI) [grant number ANR-19-PI3A-0004]. Jian Gao acknowledges the China Scholarship Council for a scholarship. Bogang Jun wishes to acknowledge the support from Inha University.