Unravelling regional inequality: the heterogeneous impact of China’s Great Western Development Program

This paper studies China's Great Western Development Program, which was designed to promote growth in the backward western provinces. In addition to evaluating its original policy goal, we further investigate its unintended consequences and potential mechanisms. Employing a regression discontinuity design and night-light series data, we find that the Program led to a 1.3–1.7% faster annual output growth in China's western region. Though the financial investment is homogenous, the positive growth effects are limited to localities with better initial endowments. We suggest that the Program has widened inequality within the treatment group due to lack of targeting.