Empowering Cities

This paper utilizes a countrywide process of county-to-city upgrading in the 1990s to identify whether extending the powers of urban local governments leads to better firm outcomes. The paper hypothesizes that since local leaders in newly promoted cities have an incentive to utilize their new administrative remit to maximize gross domestic product and employment, there should be improvements in economic outcomes. In fact, aggregate firm-level outcomes do not necessarily improve after county-to-city graduation. However, state-owned enterprises perform better after graduation, with increased access to credit through state-owned banks as a possible explanation. Importantly, newly promoted cities with high capacity generally produce better aggregate firm outcomes compared with newly promoted cities with low capacity. The conclusions are twofold. First, relaxing credit constraints for firms could lead to large increases in their operations and employment. Second, increasing local government's administrative remit is not enough to lead to better firm and economic outcomes; local capacity is of paramount importance.

Bibliographic Details

Main Authors:	Mukim, Megha, Zhu, T. Juni
Format:	Journal Article biblioteca
Published:	The MIT Press 2018-03
Subjects:	CAPACITY, CREDIT ALLOCATION, DECENTRALIZATION, FIRM-LEVEL DATA, URBAN DEVELOPMENT, URBAN GOVERNANCE, STATE-OWNED ENTERPRISES, LOCAL GOVERNMENT, URBANIZATION,
Online Access:	http://hdl.handle.net/10986/29658
Tags:	Add Tag No Tags, Be the first to tag this record!