Professor Siqi Zheng delivers the keynote speech at the 7th RUSE in Changsha, China

By MIT-CFC•19 Jun, 2018

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Professor Siqi Zheng delivering a keynote speech at RUSE 2018

Professor Siqi Zheng, the Faculty Director of the MIT China Future City Lab, gave a keynote speech at the 7th International Workshop on Regional, Urban, and Spatial Economics in China (RUSE) in Changsha on June 9th, on “Parks in China: Growth Engine and Misallocation Cost."
 

Professor Zheng’s speech educated the audience about the recent academic work of heterogeneous effects of placed-based policies, including her recent research on this topic. Zheng highlighted the unique institutional background of China’s industrial park policies and their successes or failures in stimulating urban economic growth.
 

Zheng began by summarizing the findings in the paper “The Birth of Edge Cities in China: Measuring the Effects of Industrial Parks Policy,” coauthored with Weizeng Sun (Jinan University), Jianfeng Wu (Fudan University), and Matthew E. Kahn (University of South California). The paper, published in Journal of Urban Economics, is the first attempt to measure the localized spillover effects of 110 parks built in eight major cities on firm productivity, wages, and local manufacturing employment growth. According to Zheng, the park’s spillover effects are heterogeneous. The geographic spillover effect is increasing in the park’s overall human capital level, the FDI share, administrative level, age, and its “synergy” with nearby incumbent firms. Zheng also highlighted the role of the strong government role in solving a land assembly problem and facilitating the cross-firm coordination, which leads to the rapid development of firm clusters in China.
 

“Our results show that not all industrial parks are successful. We want to understand why such place-based investments are allocated to cities with relative low-efficiency gains.” Professor Zheng, the Samuel Tak Lee Associate Professor of Real Estate Development and Entrepreneurship at MIT, said in her keynote speech. In a recent working paper — “The Revealed Preference of the Chinese Communist Party Leadership: Investing in Local Economic Development versus Rewarding Social Connections” — released by the National Bureau of Economic Research in March, Zheng and the same group of researchers conduct a follow-up research project to answer this question. Zheng argued that the central government delegates the site selection decision to provincial leaders while the provincial leader may allocate such place-based investments to reward socially connected mayors. Zheng and her coauthors conduct a revealed preference test of industrial park site selection and discuss the misallocation of capital due to the willingness of China’s provincial leaders to sacrifice economic development to reward social connections. Zheng said to the audience, “We find that a provincial leader is willing to sacrifice 1.6% of the province’s annual GDP for helping a connected subordinate.”

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Professor Siqi Zheng having discussions with the audience in the Q&A session

In the Q&A session following Zheng’s keynote speech, the audience discussed with Professor Zheng about China’s place-based policies as well as the causes and the consequences of the misallocation issue. Zheng also shared her thoughts on the policy implications of her research for place-based investments in China. Around 100 distinguished scholars from China, U.S., U.K., France, Japan, Singapore, and Australia attended Zheng’s keynote speech at RUSE 2018. The two-day workshop was organized by the College of Economics and Trade, Hunan University, together with International Regional Science Review, Journal of Regional Science, Spatial Economic Analysis, Growth and Change, Journal of Social and Economic Geography, Economic Geography, and Letters in Spatial and Resource Sciences.