UCLA

This dissertation consists of two chapters that analyze the effects of placed-based policy and fiscal stimulus in international economics, with a focus on the Chinese economy.In the first chapter, I investigate the causal effects of special economic zones (SEZS) on local economies in China using an instrumental variable (IV) approach, leveraging cultural ties between mainland China and Hong Kong as instruments. By examining data from the 2000s, the study reveals that SEZ status significantly increases GDP and GDP per capita, primarily through enhanced productivity and investment rather than mass labor influx. Unlike traditional OLS estimates, the IV method highlights the nuanced impact of SEZs on various economic factors, providing fresh insights into their long-term effectiveness and policy implications. In the second chapter, co-authored with Kezhou Xiao, we investigate the disruptive effects on the Chinese state-owned enterprise (SOE) reform process following the Global Financial Crisis and the subsequent fiscal stimulus, which we treat as exogenous to firms. Using a triple difference (DDD) identification strategy, we report several findings: (i) The allocation of the 2008-2010 fiscal stimulus funds inversely correlates with prior levels of privatization and is preferentially channeled through SOEs; (ii) We discover that although SOEs exposed to the stimulus package outperform private firms in the same market, this effect is primarily driven by SOEs operating in less privatized markets; (iii) Additionally, the stabilization program increased nationalization efforts at the aggregate level. In short, the fiscal stimulus represents a shift in SOE reform strategy, serving to strengthen those operating in less privatized markets, even as macro-level privatization deepens. We discuss the implications of our results using a political economy model with firm dynamics.