Empowering Cities: Good for Growth?
Evidence from the People’s Republic of China
Megha Mukim and T. Juni Zhu∗

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. 实际上, aggregate firm-level outcomes do
not necessarily improve after county-to-city graduation. 然而, state-owned
enterprises perform better after graduation, with increased access to credit
through state-owned banks as a possible explanation. 重要的, 新
promoted cities with high capacity generally produce better aggregate firm
outcomes compared with newly promoted cities with low capacity. 这
conclusions are twofold. 第一的, relaxing credit constraints for firms could lead to
large increases in their operations and employment. 第二, increasing local
government’s administrative remit is not enough to lead to better firm and
economic outcomes; local capacity is of paramount importance.

关键词: 容量, credit allocation, 权力下放, firm-level data, People’s
Republic of China, urbanization
JEL codes: G21, H81, L11, R11, R51

我. 介绍

To promote urbanization in the 1980s, the Government of the People’s
Republic of China (PRC) began upgrading the status of counties to that of
county-level cities. This practice persisted until 1997. Counties were eligible to

∗Megha Mukim (corresponding author): Senior Economist and Competitive Cities Team Leader; Trade and
Competitiveness and Social, Urban, Rural, and Resilience Global Practices, 世界银行集团, 华盛顿, 直流,
美国. 电子邮件: mmukim@worldbank.org; 时间. Juni Zhu: Private Sector Development Specialist, Trade and
Competitiveness Global Practice, 世界银行集团, 华盛顿, 直流, 美国. 电子邮件: tzhu@worldbank.org.
The authors are grateful to several World Bank Group staff who contributed their time generously to this paper,
providing feedback, comments, and suggestions, including Stefano Negri, Bob Rijkers, Ana Aguilera, Leo Iacavone,
and Bilal Zia. Ritam Chaurey worked side-by-side with us and provided constructive and timely comments at every
过程的阶段. The authors received constructive feedback from seminar participants in Washington, DC and
北京, including Bert Hofman, Paul Procee, Karlis Smits, Min Zhao, Shahid Yusuf, David Robalino, David Mason,
Chandan Deuskar, and Guilherme Lichand. Xiaobo Zhang (International Food Policy Research Institute) and Lixing
李 (Peking University) provided access to data and answered many of our questions. 最后, the authors would also
like to thank the managing editor and two anonymous referees for helpful comments and suggestions. Funding from
the Competitive Industries and Innovation Program is gratefully acknowledged. The usual disclaimer applies. 这
Asian Development Bank recognizes “China” as the People’s Republic of China.

Asian Development Review, 卷. 35, 不. 1, PP. 175–195
https://doi.org/10.1162/adev_a_00110

© 2018 Asian Development Bank
and Asian Development Bank Institute

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176 Asian Development Review

桌子 1. County to County-Level City Minimum Upgrading Requirements

Population Density (person/km2)

Percentage of counties in

this category

Industrialization level

Industrial output

Share of industrial output value
in gross value of industrial
and agricultural output

>400

100–400

<100 25% 45% 30% CNY1.5 billon 80% CNY1.2 billion 70% CNY0.8 billion 60% Population engaged in Size of nonagricultural 150,000 120,000 100,000 nonagricultural activities population Share nonagricultural 30% 25% 20% population in total population Fiscal strength Fiscal revenues Per capita fiscal revenues CNY60 million CNY100 CNY50 CNY40 million million CNY80 CNY60 CNY =yuan, km2 = square kilometer. Source: Fan, Shenggen, Lixing Li, and Xiaobo Zhang. 2012. “Challenges Creating Cities China: Lessons from a Short-Lived County-to-City Upgrading Policy.” Journal Comparative Economics 40 (3): 476–91. Table 2. County to County-Level City Upgrades, 1994–1997 Number county-year observations by upgrading status number of requirements satisfied Number requirements satisfied Total 0 1 Nonupgrading cases Upgrading cases 6,401 99 4,583 24 1,317 30 2 465 39 3 36 6 Source: Creating Cities from a Journal of 476–91. l D o w n o a d e d f r o m h t t p : >下载pdf