Resources coupled with executive authority: Implications of relocating government administrative headquarters for local economic development

Abstract

Despite more than three decades of market-oriented reforms, the Chinese government’s administrative capacity remains potent, exerting a substantial influence on economic development. This study delved into the economic ramifications of relocating government administrative headquarters to recipient counties, employing data from Chinese prefecture-level cities spanning from 2005 to 2019. We utilized event study analysis and the difference-in-difference method to conduct our analysis. Our results unveiled a significantly positive impact of administrative headquarters relocation on economic growth in the recipient counties. This was substantiated by an average increase of 2.236 in the nighttime light index, constituting 8.5 % of the sample mean for these counties. Notably, we found that the departure of administrative headquarters had no significant effect on the economic growth of the original counties. Therefore, the overall effect of administrative headquarters relocation was positive.