Disrupted Development: Urban Productivity Under Changing Place‐Based Industrial Policies in China

ABSTRACT Despite the consensus on the importance of urban policy stability, the negative impacts of frequent policy changes on urban development have seldom been accurately estimated. This study aims to fill this gap by empirically analyzing the effects of changes in targeted areas of place‐based policies on urban productivity and explores the underlying mechanisms. We evaluate these policy changes by analyzing shifts in the spatial distribution of city governments′ industrial land supply, utilizing a data set comprising 319,276 industrial land parcels in 285 Chinese cities between 2008 and 2016. The findings reveal that frequent changes in targeted areas of place‐based policies, driven by local governments' political incentives, suppress innovation, leading to declines in technological progress and total factor productivity (TFP). The decomposition analysis reveals that the negative impact is primarily due to excessive changes, particularly the creation of “short‐lived” industrial zones. While these frequent policy changes have improved government officials' promotion prospects and have not immediately harmed short‐term GDP growth (as factor inputs increase), the resulting decline in TFP threatens the sustainability of long‐term economic growth.