The Impact of Development Zones on Economic Growth in Less Developed Regions: Evidence from Guangxi, China

Abstract

The development zone is an important institutional form of industrial spatial organization in China’s economic transformation and is an essential growth pole of urban economic development. Based on the county-level panel data of Guangxi from 2005 to 2017, this study contributes to the discussion by exploring the effects of development zones on economic development in developed regions. Additionally, this study further attempts to illustrate the character of the agglomeration effect built on development zones and try to reveal the significant influence factors of the effect of development zones on the economy. Through the progressive difference-in-difference (DID) model approach, empirical results reveal that the development zone has a negative effect on the local economy within three years after its establishment, and the “development zone fever” significantly reduces the potential for regional economic growth. With the decrease in the established frequency of development zones, the effect of the development zone on economic growth becomes positive. However, this promoting effect is unsustainable because the agglomeration effect of development zones is mainly caused by the “clusters of enterprises”. Certain industrial agglomeration and technological capabilities are essential prerequisites for development zones to promote economic growth, while the negative impact appears in a highly competitive environment caused by excessive government intervention. Therefore, the key to maintaining the sustainability of development zones’ competition is to strengthen the assessment standard of survival of the fittest for enterprises, and promote the agglomeration of high-end industries by improving the selection effect of development zones. These findings have great potential in policy making and can be used as a resource by policymakers to promote the sustainable development of less developed regions.