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Community Networks and the Growth of Private Enterprise in China

November 22, 2018

Kuala Lumpur World Bank-University of Malaya Joint Seminar

  • This paper identifies and quantifies the role played by community networks organized around the birth county in the growth of private enterprise in China. The model that we develop generates predictions for the dynamics of firm entry, sectoral and spatial concentration, and firm size, across birth counties with different levels of social connectedness (measured by population density) when networks are active. We validate each of these predictions over a twenty year period (1990-2009) with unique administrative data that covers the universe of registered firms and provides information on entrepreneurs' birth counties. The rich set of results that we obtain, taken together, allow us to rule out alternative non-network-based  explanations. Additional results provide direct support for the network channel, indicating that spillovers occur within the birth county (and, going down even further, within clans within the county). Having validated the model, we estimate its structural parameters and conduct counter-factual simulations, which indicate that entry over the 1995-2004 period would have been 64% lower in the absence of community networks. Additional counter-factual simulations shed light on the design of optimal industrial policy in economies where networks are active or have the potential to be activated.

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  • Xiaobo Zhang

    Xiaobo Zhang is a distinguished chair professor of economics at the National School of Development, Peking University in China, and senior research fellow of IFPRI. His research fields include agricultural economics, development economics, and Chinese economy. He has published widely in top economics journals, such as Journal of Political Economy, Proceedings of National Academy of Science, Journal of Development Economics, Journal of Economics Perspective, Journal of International Economics, and Journal of Public Economics. His recent books include Governing Rapid Growth in China: Equity and Institutions (2009), Regional Inequality in China: Trends, Explanations and Policy Responses (2009), Narratives of Chinese Economic Reforms: How Does China Cross the River? (2010), Oxford Companion to the Economics of China (2014), and China Regional Innovation Report (2016, in Chinese). He is the Chief Editor of China Economic Review. He received Sun Yefang Prize for Economics Research in China (the most prestigious award in the field of economics in China) and Zhang Peigang Development Economics Outstanding Achievement Award (the highest award in the field of development economics). He has rich field experience in developing countries and has conducted surveys in China, Bangladesh, Ethiopia, India, and Myanmar.


  • WHEN: Thursday, November 22, 2018; 12:30 -2:00PM
  • WHERE: World Bank Malaysia Office, Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn
  • RSVP: Kindly RSVP by Wednesday, November 21, 2018