Government cooperation, market integration, and productivity: evidence from China

ABSTRACTABSTRACTThis paper examines the causal effect of regional market integration on firm productivity through the use of 2001–2008 firm-level microdata in China. The research design relies on a regression discontinuity design based on China's Pan-Pearl River Delta (PPRD) regional cooperation policy. The results indicate that the PPRD regional cooperation policy increases the total factor productivity (TFP) of firms by 6% on average. The positive impact of the PPRD regional cooperation policy on TFP is greater for private firms, large firms, and labour-intensive firms. Exploring the mechanism through which regional cooperation increases firm TFP, we find that the PPRD regional cooperation policy improves firms' productivity primarily by expanding the scale of firms, promoting technological innovation, and optimizing the allocation of factors. The study findings deepen our understanding of productivity improvement from the perspective of the market environment.KEYWORDS: Regional economygovernment cooperationproductivitymarket integration; ChinaJEL CLASSIFICATION: F15R11R58 AcknowledgmentsWe thank LetPub (www.letpub.com) for its linguistic assistance during the preparation of this manuscript.Disclosure statementNo potential conflict of interest was reported by the author(s).Author contributionsAll of the authors contributed to the study conception and design. Material preparation, data collection, and analysis were performed by Tao Lin and Zhao Chen. The first draft of the manuscript was written by Tao Lin and Zhao Chen, and all of the authors commented on previous versions of the manuscript.Data availability statementThe data that support the findings of this study are available from the Data Center, School of Economics, Shanghai University of Finance and Economics at http://microdata.sozdata.com/login.html?page=home. However, restrictions apply to the availability of these data, which were used under licence for the current study and so are not publicly available. Data are, however, available from the authors upon reasonable request and with permission of the School of Economics, Shanghai University of Finance and Economics.Additional informationFundingThis work was supported by the Social Science Projects of the Chinese Ministry of Education (16JZD018) and the Graduate Innovation Fund of Shanghai University of Finance and Economics (kycx-2023-04)