Clustering, Growth, and Inequality in China


ShanghaiTech SEM Working Paper No. 2018-007


Di Guo

The University of Hong Kong

Kun Jiang

The University of Roehampton

Chenggang Xu

CKGSB, HKU, Tsinghua University

Xiyi Yang

ShanghaiTech University - School of Entrepreneurship and Management



This study examines the effects of China’s industrial clusters on its economic growth and urban–rural income inequality. A density-based index (DBI) is developed to capture the unique features of such clusters in China. From a county-level DBI panel data constructed based on firm-level and county-level datasets, we find that strong clusters and entrepreneurial clusters substantially enhance economic growth. Moreover, entrepreneurial clusters reduce urban–rural income inequality by increasing the income of rural residents. Identification issues are carefully addressed by deploying an instrumental variable approach.


Keywords: China, clustering, geography, growth and inequality, institutions

JEL Classification: O14, O15, R11


Date Written: September, 2017


Available at SSRN: 3159741

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【No. 2018-007】SSRN-2 Clustering, Growth, and Inequality in China.pdf