The Effects of the Development Zone Upgrading on the Diversification of Firm’s Product Exports: Evidence from Chinese Exporters

Abstract

Against the backdrop of frequent international trade frictions, reducing external risks in export trade through industrial policies has become crucial for China’s high-quality and steady foreign trade development. This paper examines the impact of development zone upgrading policies on the diversification of firm product exports by using a time-varying difference-in-differences model. We find that after the upgrading of development zones, the diversification of firm product exports increases by 2.13%, and concentration decreases by 1.33%. Moreover, this policy has a stronger impact on the diversification level of product exports for firms upgraded to customs special supervision areas, located inland, and engaged in general trade. These conclusions remain robust even after conducting additional robustness tests using alternative measures of the dependent variable, different identification methods for development zone upgrading, and controlling for other industrial policy effects. Furthermore, the upgrading of development zones improves export diversification through three main channels: enhancing firm innovation capabilities, optimizing management efficiency, and providing financial support to firms.

Keywords:

• Development zone upgrading
• export diversification
• staggered DID
• innovation
• management
• China

JEL CLASSIFICATION:

• F14
• O10
• R58

Acknowledgments

We would like to thank Guijun Lin, Jiazhang Zhao, two anonymous referees, and the Editor of this journal.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The replication package for this paper is available at https://doi.org/10.6084/m9.figshare.25599900.

Notes

1 For example, Longyan National Economic and Technological Development Zone reduces or waives the guarantee fee for firm financing, Kullu National Economic and Technological Development Zone adjusts the guarantee fee rate and broadens the guarantee method, and Nanning National Economic and Technological Development Zone reduces the interest rate for firm loans and gives discount support.

2 Due to the adjusted values of the Herfindahl-Hirschman Index (HHI) falling within the range of (0, 1], it is not feasible to apply a logarithmic transformation directly. Therefore, the regression coefficients represent the unit changes in the dependent variable. To calculate the percentage variation, the coefficient must be divided by the average value of the dependent variable.

3 In the literature, the control for city-level omitted variables is typically achieved by adding city-year interaction fixed effects. In our study, since many cities have only one development zone upgrading event, directly adding city-year interaction fixed effects would result in severe multicollinearity issues. Therefore, we controlled for this by including a variety of city-level variables.

4 We classify national-level development zones into customs special supervision zones and non-customs special supervision zones. The latter category includes both economic and technological development zones and high-tech industrial development zones.

Additional information

Funding

This work was supported by National Social Science Fund of China [21AJY025]; Beijing Municipal Education Commission [SM202110038012].