Research On The Formulation,Implementation And Effects Of Local Government Industrial Policies

Since China’s reform and opening up,it has gradually established a socialist market economy system with Chinese characteristics by absorbing domestic and foreign economic development experiences.What the socialist market economy system with Chinese characteristics emphasizes is combining the "visible hand" of the government with the "invisible hand" of the market.Industrial policies play an important role in regulating the allocation of resources,especially in China.However,there are huge differences in political,economic,cultural and geographical endowments between various regions in China.Whether it is administrative area,population size or economic development,each province is equivalent to a medium-sized country.Therefore,examining the formulation and implementation of industrial policies and their effects from local governments perspective in China is not only important,but also necessary.Based on the provincial-level local government industrial policies and the huge micro-data of Chinese industrial enterprises,this paper comprehensively examines the formulation and implementation of Chinese local government industrial policies,and then give a further policy evaluation.In terms of the formulation features of local government industrial policies,this paper systematically inspected the characteristics of the formulation of Chinese local government industrial policies from the aspects of industry distribution,time evolution and regional differences.The study found that encouraging industrial policies are mainly concentrated in emerging industries,neutral industrial policies are mainly concentrated in traditional manufacturing and real estate,and inhibitory industrial policies are mainly concentrated in mining and raw material manufacturing.Encouraging industrial policies gradually withdraw from traditional industries and increasingly concentrate in emerging industries,while neutral and inhibitory industrial policies increasingly concentrate in industries with overcapacity or lack of order.On the one hand,the industrial policies of local governments in various regions are highly similar to those of the central government,on the other,the industrial policies of local governments among various regions also show great differences.In terms of the actual impact of government industrial policies,this article uses the text data of the "Five-Year Plan" of the central and local governments and data from Chinese industrial enterprises,empirically examining the impact of government industrial policies on the industry financial and taxation support.The study found that in actual economic activities,local key industrial policies rather than central key industrial policies played a leading role in the financial support of the industry.Among central key industrial policies,only the key industrial policies both developed by the central and local governments can work.Further research found that local economic development level,local financial level,local market environment,local financial level,local fiscal strength,and local fiscal pressure are important factors that affect the effects of local government key industrial policies on industry support.In terms of implementation motivation of local government industrial policies,this paper creatively uses the "average distance" of the regional advantageous industries as an instrumental variable to solve the endogenous problem,and makes an empirical test on the degree of local government industrial policy implementation.The study found that local governments will provide fiscal and tax support to the industry according to local conditions in combination with local explicit comparative advantages,but the impact presents an inverted U-shaped trend.And the industries supported by the central industrial policy are less susceptible to the influence of regional explicit comparative.In addition,the local government’s industrial policy shows an inverted U-shaped change trend with the region’s explicit comparative advantage,which only occurs in industries with a high competition environment.Contrary to the explicit comparative advantage,the impact of local potential comparative advantage on the industry’s fiscal and taxation support presents a U-shaped trend.On the effect level of local government industrial policies,this article provides a staggered DID identification strategy to estimate the impact of local industrial policies on firm performance.The study found that local industrial policies can significantly increase the output and total factor productivity of enterprises.On the one hand,local industrial policies attract more investment and promote employment through preferential policies,prompting production activities of firms;on the other hand,local industrial policies attract more companies to enter key support industries,increasing the level of competition in the industry,then improve the total factor productivity of firms.However,the promotion effect of local industrial policies only occurs in the eastern region,and the formulation and implementation of local government industrial policies will have an impact on corporate performance.This article is helpful to understand the formulation laws,implementation characteristics and actual effects of local government industrial policies,so as to provide useful reference for the central and local governments to better formulate and implement industrial policies.To the central government,when formulating national industrial policies,the specific conditions of each locality should be taken into account as much as possible.Instead of implementing a one size fits all industrial policy,it should set up industrial policy incentives based on local conditions.To the local governments,when formulating and implementing local industrial policies,they should not blindly follow the trend,but develop local industrial policies in light of local conditions.In addition,local governments should attach importance to integrating industrial policies and competition policies.Competitively compatible industrial policies will promote the high-quality development of the industrial economy,thereby bringing greater policy benefits to China’s economic development.