Chongqing as an Institutional Growth Pole - Fostering the Rise of Private Firms in China's Interior

The rise of private firms was vital for China’s coastal economic development, and this institutional change should play an essential role if the country wants to replicate its successes elsewhere. The first testing ground for such replication is the Go West Program. Aimed at the catching up of China’s interior, the program uses the city of Chongqing as a growth pole. Based on the coastal experience, the city should not only function as a traditional growth pole supporting regional investments and structural transformation, but also as an institutional growth pole fostering the rise of private firms in the region. Looking into Chongqing, this paper is one of the first to study institutional growth poles. Applying a difference-in-difference approach using data from the China Statistical Yearbooks (1986-2015), it is found that Chongqing only limitedly functioned as an institutional growth pole. Only provinces that allowed for the rise of private firms early on in the reform period could benefit from Chongqing. Those provinces already had a relatively similar economic structure to Chongqing, and could profit from strong bottom-up dynamics. With its mixed results, it seems unlikely that Chongqing can bring China’s coastal successes to the interior, showing both the importance of local institutional circumstances and the limitations of institutional growth poles.The rise of private firms was vital for China’s coastal economic development, and this institutional change should play an essential role if the country wants to replicate its successes elsewhere. The first testing ground for such replication is the Go West Program. Aimed at the catching up of China’s interior, the program uses the city of Chongqing as a growth pole. Based on the coastal experience, the city should not only function as a traditional growth pole supporting regional investments and structural transformation, but also as an institutional growth pole fostering the rise of private firms in the region. Looking into Chongqing, this paper is one of the first to study institutional growth poles. Applying a difference-in-difference approach using data from the China Statistical Yearbooks (1986-2015), it is found that Chongqing only limitedly functioned as an institutional growth pole. Only provinces that allowed for the rise of private firms early on in the reform period could benefit from Chongqing. Those provinces already had a relatively similar economic structure to Chongqing, and could profit from strong bottom-up dynamics. With its mixed results, it seems unlikely that Chongqing can bring China’s coastal successes to the interior, showing both the importance of local institutional circumstances and the limitations of institutional growth poles