Economic Development Zones?the Choice Of Leading Industries And The Formation Of Over-capacity

China's multi-cyclical overcapacity can not be explained by simple strategic choices and cyclical theories.It needs to combine china's unique political system with competition.By bolstering the dominance of the development sector,stimulating investment and boosting regional growth is an important tool for local competition.Local competition is characterised by a combination of blind and competitive comparisons,resulting in the similar leading industry.To win in the zero-sum game,stimulating investment of leading industries will become one of the fastest and the most effective ways,which inevitably appears to be overcapacity.Behind the political tournament competition is heterogeneous officers,different officers are inclined to choice the different leading industries,which affects the formation of overcapacity.Using the industrial corporate data and economic development sector data from 2000-2007,this paper examines the relationship between the choices of leading industries of economic devolopment zones and the formation of overcapacity in china through propensity score match(PSM)and double difference in difference(DDD).This article confirms the importance of the leading industrial policy to corporate Capacity utilization,particularly in the role of local growth.We find that simple leading industrial policy does not necessarily lead to overcapacity.Compared with the nonleading industry,the industry that has been identified by local governments has not seen a more pronounced Capacity utilization decline.However,the result of double difference in difference(DDD)shows that the highly similar leading industry policy does significantly reduce the capacity utilization of firms,both of which are established between neighboring cities and non-adjacent cities in the same province.On the contrary,if there is a similar phenomenon in the neighboring cities of other provinces,there is no decline in capacity utilization,which means that local growth competition is easily happend in the same administrative area.From the geographical distribution of leading industries,due to the growth competition during the coastal cities of the eastern region is more intense than inland provinces,we also found that the phenomenon of highly similarity of the leading industry policy resulting in overcapacity problems mainly occurres in the eastern areas.Then,the officials' heterogeneity shows that young and highly educated local officials are more likely to choose high-similar leading industries within a province where competition is present.Using the results of the regression as IV into the model of double difference in difference(DDD)of the leading industries and the overcapacity,the regression results are still significantly negative.That is to say,young,highly educated local officials will make capacity utilization decline.Thus we find the micro foundation of the formation of overcapacity,heterogeneous officers.Finally,we also explore the channels of the leading industries leading to overcapacity.It is found that high-affinity leading industry policies do drive companies to increase new investment,which also demonstrates that investment-driven growth models are an important cause of overcapacity.In contrast,the leading industry policy in improving the productivity of enterprises andnew product promotion has little effect.This paper is helpful to evaluate the important influence of over-competition behavior of local government on the formation of overcapacity,and through the introduction of the heterogeneity of officials,it provides an important micro-foundation for overcapacity.