Agglomeration and the local state : the tobacco economy of Yunnan, China

This paper explores the interplay of local government action with historical contingency, innovation, and external economics in the world’s largest tobacco agglomerate in Yunnan, China. Formed in a least industrialized province and promoted by local government as their primary revenue bases, the agglomerate gains a head start from strategically timed institutional innovation; its further growth draws greatly on relational stability and knowledge spillovers among local producers. The intervening effects of local government action are exerted through financial aid, regulatory flexibility, and fiats. Implications for the study of regional economies are discussed