The Effects of Urban Transformation on Productivity Spillovers in China

Abstract

We analyze the impact of China's massive urban-transformation process on productivity spillovers for the east-coast electrical apparatus sector by combining the sub-prefecture-level population census data in 2000 and 2010 with detailed firm-level data from 1999 to 2007. At the sub-prefecture level, we identify three types of regions (metro-core, metro-ring, and non-metro) and develop three urban transformation measures (modernization, mobility, and disparity). A tailored spatial Durbin model enables us to distinguish between intra- and inter-regional technology spillovers. The baseline model reveals strong technology spillovers between neighboring firms, particularly those in close range. All three types of urban-transformation measures have significant impacts on technology spillovers. Modernization and mobility boost spillover effects, whereas economic disparity impedes inter-regional spillovers. Based on the structural difference between the three types of regions, our findings imply that metro-ring and non-metro regions are the major beneficiaries of productivity spillovers related to urban transformation.