Beschreibung:
Can temporary policy interventions have permanent effects on regional industrial development? Exploiting disaggregated data on industrial construction in China before 1978 under the centrally planned economic system, this paper compares the long-term development of industries that received investment during the period of 1953-1978 to those without investment within comparable industry-prefecture pairs. The results suggest that temporary interventions can have long-term effects through spillover effects within and between industries. However, it is crucial to consider the local factor endowment structure to fully realize the impacts. We find that deviations of the production technology from the factor endowment structure significantly weaken these long-term impacts. This finding suggests that the average long-term effect of temporary policy interventions estimated in the literature may mask important heterogeneity based on the congruence between the factor intensity of targeted industries and local comparative advantages