Abstract
Industrial policy is an important means for governments to promote industrial development and accelerate economic growth. This paper mainly uses the Chinese Law and Regulation Database as the source of the relevant laws and regulations of China’s industrial policies from 2003 to 2015. On this basis, it empirically examines the impact of industrial policies on economic growth. The study finds that China’s industrial policy has significant positive effects on economic growth and that industrial structure rationalization is an important channel of industrial policy to improve economic growth. The findings are also valid under a series of robustness tests and endogenous corrections. The results of heterogeneity tests confirm that there are heterogeneous effects pertaining to industrial policy on economic growth among different sub-regional areas, administrative levels, industrial development stages, and industrial policy types. Overall, this paper supports the hypothesis that industrial policy has positive effects on economic growth and, accordingly, provides a basis for industrial policy implementation.
Highlights
The New Structural Economics emphasizes the role of government intervention on market economy, and holds the view that governments should provide judicious guidance according to various circumstances, especially to solve external problems that enterprises may face in the process of industrial upgrading and to coordinate the infrastructure investment that cannot be internalized by an enterprise's decisionmaking (Lin 2012)
Mechanism variable measurement: structural transformation This paper focuses on whether industrial structural transformation is the possible mechanism for industrial policy to affect economic growth
This paper intends to further explore whether industrial structural transformation is the potential mechanism of industrial policy effecting economic growth
Summary
The New Structural Economics emphasizes the role of government intervention on market economy, and holds the view that governments should provide judicious guidance according to various circumstances, especially to solve external problems that enterprises may face in the process of industrial upgrading and to coordinate the infrastructure investment that cannot be internalized by an enterprise's decisionmaking (Lin 2012). The empirical results of heterogeneity tests discussed above show that industrial policy has heterogenous effects on economic growth in different sub-regional areas, administrative levels, industrial development stages, and industrial policy types, which confirms Hypothesis 2. This demonstrates that it is vital to consider the developmental levels of cities when industrial policy is designed and evaluated, and the government should make greater efforts on designing and implementing functional industrial policy. (1) *** means P < 1%; (2) The estimated coefficients in parentheses are the robust standard errors clustering to the city level industrial development stages, in general, industrial policy has a significant role in promoting economic growth. It demonstrates that after changing the estimation methodology, industrial policy still has a significant positive effect on economic growth
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