The agglomeration dilemma: how Layer upon Layer undermines the effects of development zone policies in China

Le résumé fourni par la source

Development zones have become a key policy instrument for promoting industrial development across countries, making the accurate evaluation of their policy effectiveness crucial for policy optimization. However, existing studies often overlook the moderating role of institutional environments in shaping policy outcomes. This study examines 283 Chinese cities, constructing an industrial agglomeration index by integrating inter-industry input-output linkages with firm-level registration data, to empirically analyse the impact of the increasing number of development zones on industrial agglomeration, and the moderating effect of the Layer upon Layer (LuL), a unique institutional phenomenon in China’s governance system. The results demonstrate that an increase in the number of development zones significantly promotes industrial agglomeration, but LuL substantially undermines this positive effect. Heterogeneity analysis reveals that the agglomeration effects of development zone expansion are more pronounced in cities with a smaller scale of land transfer, stronger industrial foundations, and lower fiscal pressure. Further analysis indicates that industrial agglomeration significantly enhances GDP and innovation level, though such benefits are more substantial in cities with lower levels of LuL. These findings underscore the critical role of institutional conditions in shaping the effectiveness of development zone policies and offer empirical evidence and policy implications for understanding the performance of industrial policies under varying institutional constraints.

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