DP15396 Industrial Clusters, Networks and Resilience to the Covid-19 Shock in China

Author(s): Ruochen Dai, Dilip Mookherjee, Yingyue Quan, Xiaobo Zhang
Publication Date: October 2020
Keyword(s): China, Clusters, COVID-19, firms, Social Networks
JEL(s): D31, I3, J12, J16
Programme Areas: Industrial Organization, Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15396

We examine how exposure of Chinese firms to the Covid-19 shock varied with a cluster index (measuring spatial agglomeration of firms in related industries) at the county level. Two data sources are used: entry flows of newly registered firms in the entire country, and an entrepreneur survey regarding operation of existing firms. Both show greater resilience in counties with a higher cluster index, after controlling for industry dummies and local infection rates, besides county and time dummies in the entry data. Reliance of clusters on informal entrepreneur hometown networks and closer proximity to suppliers and customers help explain these findings.