Place-based Policy, Government Intervention and Public Service: Evidence from “The Construction of Third Front”

This study examines the long-term effects of a significant place-based policy in China's history- “The Construction of Third Front”, which led to the relocation of significant amounts of industry and labor from coastal to inland regions under the central government's control. Using a spatially discontinuous design, we identify that the policy has resulted in a hindrance to the development public services in the affected regions over time, with the gap between these and the eastern regions continuing to widen. We argue that the overzealous intervention of the central government disrupted the efficiency of factor allocation in the TF region and caused a significant impact on supply and demand patterns for public services in this area, which persists even after the cessation of the policy. JEL codes:H41, H50, O25