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In order to verify the economic effect of the strategy of the rise of the central region, based on the panel data of 26 provinces in China from 1994 to 2016, taking Hubei Province as an example, the author uses the synthetic control method to analyze the impact of the strategy of the rise of the central region on the economic growth of Hubei Province. The study shows that the strategy of the rise of the central region has significantly promoted the economic growth of Hubei Province, which is mainly achieved by improving the investment environment and improving the level of education.

In order to coordinate regional economic development and promote economic growth in central China, the central government launched the strategy of central China’s rise in 2006. In more than a decade, the country implemented a number of measures to ensure the execution of the strategy of central China’s rise. For example, the government promulgated some guidance documents, supported the construction of the urban agglomeration like Taiyuan, Zhengzhou, Wuhan and Changsha, held Central China investment and trade fair and so on. So how effective are these measures on economic growth? The analysis and discussion of this question is helpful to the implementation and improvement of the follow-up measures. Taking Hubei province as an example, this paper analyzes the economic effect of the strategy of central China’s rise on Hubei province by using the synthetic control method, and finds that the strategy effectively promotes the economic growth of Hubei province, and mainly promotes the economic growth by improving the investment environment and improving the education level. The main contribution of this paper lies in the introduction of synthetic control method for the first time to analyze the economic effect of the strategy of central China’s rise and further analysis of the mechanism of the effect.

At present, there are few literatures on the economy performance evaluation of the strategy of central China’s rise. Ji Xinfeng used the 1997-2009 provincial panel data, and used the systematic generalized moment estimation method and the quadratic difference method to evaluate the strategy of central China’s rise [

Comparatively speaking, there are many literatures analyzing the strategic economic performance of western development, and the methods used are more scientific and reasonable. Liu Shenglong et al. studied the economic impact of the western development strategy on the western region by using the dual difference method (DID) [

The synthetic control method [

The question to be discussed in this paper is whether the rise strategy of central China has promoted the economic growth of Hubei province. Therefore, the outcome variable is set as the economic growth, which is measured by the per capita GDP. Refer to previous studies, the main factors (predict variables) in this paper that will affect the outcome variables is set as primary industry output value proportion of GDP, the second industry output value proportion of GDP, tertiary industry output value proportion of GDP, government size (measured by the general budget spending as a share of GDP) and foreign direct investment level (measured by the actual use of foreign direct investment as a share of GDP), the level of investment in fixed assets (measured by the whole society fixed asset investment as a share of GDP), education level (using the proportion of college students in the total population).

This article USES the 1994-2016 (with the exception of Hong Kong, Macao and Taiwan) of China in 26 provinces, municipalities and autonomous regions balance panel data to evaluate the economic effects of the strategy of central China’s rise. Hubei province which has implemented the strategy of central China’s rise since 2006 is set as treatment group, the rest of the 25 provinces, municipalities and autonomous regions is set as the control group, including Beijing, Shanghai, Tianjin, Hebei, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan, Liaoning, Jilin, Heilongjiang, Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang. The data of variables before 2008 were mainly from the compilation of statistical data of the People’s Republic of China in the past 65 years. The data after 2008 were mainly from the statistical yearbook of China. Some missing data were supplemented from the statistical yearbooks of corresponding provinces, cities and autonomous regions in the corresponding years. Descriptive statistics of each variable are shown in

This part of the empirical analysis is as follows: first, the use of synthetic control method to test whether the implementation of the rise strategy of central China has promoted the economic growth of Hubei province. Second, the placebo method was used to test the effectiveness of the rise strategy of central China on economic growth. Finally, the significance of the rising strategy of central China on economic growth is tested by permutation test.

In fact, the synthetic control method gives different weights to the control group and constructs “counterfactual” Hubei province. Then the “counterfactual” Hubei province is compared with real Hubei province.

Variate | Maximum | Minimum | Average | SD |
---|---|---|---|---|

Per capita GDP | 11.6801 | 7.3311 | 9.6455 | 0.9854 |

Proportion of primary industry | 45.9700 | 0.3900 | 14.6321 | 8.3765 |

Proportion of secondary industry | 60.1300 | 17.1300 | 44.0872 | 8.6606 |

Proportion of tertiary industry | 80.2300 | 27.6700 | 41.2774 | 8.3308 |

Fixed asset investment level | 138.6200 | 23.9800 | 54.1844 | 23.2155 |

The size of government | 137.9200 | 4.9200 | 20.3370 | 17.2393 |

Level of foreign direct investment | 24.2543 | 0.0014 | 3.2518 | 3.4532 |

Education level | 3.9900 | 0.0900 | 1.1834 | 0.8569 |

Province | Weight | Province | Weight | Province | Weight | Province | Weight | Province | Weight |
---|---|---|---|---|---|---|---|---|---|

Beijing | 0 | Zhejiang | 0 | Liaoning | 0 | Chongqing | 0 | Shaanxi | 0 |

Tianjin | 0 | Fujian | 0.003 | Jilin | 0.196 | Sichuan | 0.135 | Gansu | 0.115 |

Hebei | 0.134 | Shandong | 0 | Heilongjiang | 0.110 | Guizhou | 0 | Qinghai | 0 |

Shanghai | 0 | Guangdong | 0 | Inner Mongolia | 0 | Yunnan | 0 | Ningxia | 0 |

Jiangsu | 0 | Hainan | 0 | Guangxi | 0 | Tibet | 0.140 | Xinjiang | 0.167 |

The synthetic control method requires that the synthetic Hubei province can well fit the Hubei province before the implementation of the rise strategy of central China. It is embodied in the fact that the synthetic Hubei province is close to the real Hubei province in the key index reflecting the economic situation.

Variable | The real Hubei | The synthetic Hubei |
---|---|---|

Proportion of primary industry | 17.82 | 18.47 |

Proportion of secondary industry | 43.04 | 42.59 |

Proportion of tertiary industry | 39.14 | 38.94 |

Fixed asset investment level | 53.33 | 58.70 |

The size of government | 13.22 | 28.03 |

Level of foreign direct investment | 2.71 | 1.32 |

Education level | 1.45 | 0.99 |

The author further calculates the logarithmic growth rate of real and synthetic Hubei per capita GDP before and after the implementation of the strategy of central China’s rise. Before the implementation of the strategy of the rise of central China, i.e. from 1994 to 2005, the logarithmic growth rates of real Hubei province and synthetic Hubei province were 1.4195% and 1.4191% respectively, with little difference between the two. After the implementation of the strategy, namely from 2006 to 2016, the logarithmic growth rate of real and synthetic Hubei province was 1.4343% and 1.1603% respectively, and the difference between the two was 0.274%, which was a considerable growth effect. In addition, the author also calculated the difference between the logarithm of real per capita GDP of Hubei province and the synthetic Hubei province, and drew it into

Although the above analysis shows that the rise strategy of central China has promoted the development of Hubei province, is it an accidental phenomenon? Is it not the result of strategy implementation? In order to enhance the effectiveness of the research conclusions, the placebo method will be used in this paper. Placebo method is from medical experiments: if you want to examine the effects of a new drug, the patients will be randomly divided into two groups, one group of taking drugs, another group of taking placebo (such as sugar pill), and the research don’t tell two groups of people taking the drug or placebo in order to avoid the interference of psychological factors, and then by looking at the condition of the two groups of people to examine the effects of new drugs. In this paper, the basic idea of placebo method is: since 25 provinces outside of Hubei province did not implement the strategy of rise of central China, then choose a province in 25 provinces, assuming that the province implements the strategy of rise of central China in 2006, we use synthetic control method to analyses this province, just like the analysis of Hubei province. The province’s per capita GDP should be similar to the per capita GDP of synthetic province, or synthetic control analysis of Hubei province is only an accidental phenomenon, has no credibility. Referring to the practices of previous researchers [

2013 to 2016, the synthetic Jilin province is higher than the real Jilin province, which is consistent with the observation conclusion of Yang Tianfu and Rong Yuwei [

The significance level of the policy effect is often shown in the policy evaluation by using the double difference method and other methods. So how do you represent the level of significance of policy effects in synthetic control? Arrange inspection method is proposed to check whether the policy effect of significance in the statistical significance by Abadie [

What is the reason that the rise strategy of central China has promoted the economic growth of Hubei province? From the perspective of Liu Ruiming and Zhao Renjie, this paper also identifies the causes by examining the effects of the rise strategy of the central region on various economic growth factors. But this article is different from what they did, their way is: set the region, policy, two

virtual variables, then region virtual variables, policy variables and interaction of virtual variables and policy variables as explanatory variables, the various factors that affect economic growth as the explained variable regression analysis, interaction item represents the policy on the various factors affecting economic growth, the net effect. The approach of this paper is to continue to use the synthetic control method to analyze the net effect of the rising central China strategy on various economic growth factors. Since synthetic control method can better identify the impact of strategy implementation on the numerical value of per capita GDP than other methods, it is natural to better identify the impact of strategy implementation on other factors. In this particular way is: to set the various influence factors of economic growth as the variables, including industrial structure (measure) by the second industry accounted for the proportion of the tertiary industry, the level of investment in fixed assets, the government scale, foreign direct investment level and education level, and then use other fitting the data of 25 provinces, respectively to calculate the strategy implementation after the real value of average annual growth, synthetic value of average annual growth rate, average annual growth rate and the synthetic value of the real value of the average annual growth rate of difference, the rise of central China strategy by analyzing the difference we can observation on the influence of various factors.

Looking at

Variable | The real value | The composite value | Gap |
---|---|---|---|

Per capita GDP | 1.434 | 1.160 | 0.274 |

The industrial structure | 0.492 | −0.675 | −2.323 |

Fixed asset investment level | 7.147 | 7.082 | 0.064 |

The size of government | 4.834 | 4.756 | 0.078 |

Level of foreign direct investment | −2.235 | −6.932 | 4.697 |

Education level | 3.291 | 2.263 | 1.028 |

level. The other category is less than 0.274, such as the impact on the industrial structure, the level of fixed asset investment, the impact on the size of the government. The level of foreign direct investment reflects the “soft environment” strength of a region’s future economic development potential, and can comprehensively reflect the investment environment of a region, such as the efficiency of the government of the region, the level of government services, the openness of the region, the state of infrastructure and institutional conditions. Education level reflects a region’s human capital level, and the classic literature [

In this paper, the net effect of the rising central region strategy on the economic growth of Hubei province is tested for the first time by using the synthetic control method, and the mechanism of the rising central region strategy is analyzed. The results showed that the strategy effectively promotes the economic growth of Hubei province, and mainly promotes the economic growth by improving the investment environment and improving the education level. The limitation of this paper lies in that it does not examine the economic effect of the rising strategy of central China from the perspective of the six provinces of central China, which will be the follow-up work of the author.

The author declares no conflicts of interest regarding the publication of this paper.

Wang, P.F. (2019) Rise of Central China Strategy and the Economic Growth of Hubei Province. Modern Economy, 10, 502-512. https://doi.org/10.4236/me.2019.102034