Intellectual Property Policy and County Economic Growth: A Quasi‐natural Experiment from the Intellectual Property Powering County Project

• Published date: 01 November 2024
• Author: Changlin Yu,Bing Shen
• Date: 01 November 2024
• DOI: http://doi.org/10.1111/cwe.12557

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 35–67, Vol. 32, No. 6, 2024 35

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Changlin Yu, Bing Shen*

Abstract

As fundamental economic units, county economies play a crucial role in China’s national

economic system. However, it remains unclear whether intellectual property rights policies

at the county level can promote economic growth. We used a quasi-natural experiment

from the Intellectual Property Powering County Project (“the Project”) to measure their

impact on county economic growth from 2009 to 2020, applying a multi-period difference-

in-differences method. County economic growth indicators were measured using Enhanced

Vegetation Index-calibrated nighttime light data from the Defense Meteorological Satellite

Program and Visible Infrared Imaging Radiometer Suite. The findings demonstrated

that the Project promoted economic growth significantly by incentivizing innovation,

attracting high-tech and new-tech enterprises, and fostering brand creation. The Project

also exhibited significant heterogeneity across districts and counties, along with spillover

effects on economic growth in surrounding counties within approximately 80 kilometers.

Keywords: brand creation, county economic growth, innovation, Intellectual Property

Powering County Project, spillover effects

JEL codes: E02, O22, O43, P25

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More than 60 percent of China’s GDP currently emanates from provincial capitals,

metropolitan areas, and urban clusters, where economic development levels are

comparable to those of developed countries or regions. However, most county

economies, which include over half of China’s population and about 90 percent of

*Changlin Yu, Professor, Center for Macroeconomic Research, Paula and Gregory Chow Institute for Studies

in Economics, Xiamen University, China. Email: changlinyu@xmu.edu.cn; Bing Shen (corresponding author),

PhD Student, Paula and Gregory Chow Institute for Studies in Economics, Xiamen University, China. Email:

shenbing@stu.xmu.edu.cn. The authors are grateful for support from the China National Social Science

Foundation (No. 23BJY216), the Major Project of the key research institutes of Chinese Ministry of Education

(No. 22JJD790051), the Key Project of Social Science Foundation of Fujian Province (No. FJ2022A011), and

the Fundamental Research Funds for the Central Universities (No. 20720191070).

© 2024 The Author(s). China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License,

which permits use, distribution and reproduction in any medium, provided the original work is properly cited

and is not used for commercial purposes.

[Correction added on 2 October 2025, after first online publication: The copyright line was changed.]

Changlin Yu, Bing Shen / 35–67, Vol. 32, No. 6, 2024

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

36

its land area, still face pressing developmental challenges. These county economies

encounter significant difficulties, such as weak industrial foundations, relatively

low levels of urbanization, and limited progress in the development of information

technology, all of which impede their growth prospects. In response to this situation,

the Chinese government has taken initiatives to accelerate their development,

issuing relevant policies such as Several Opinions on Promoting Innovation-driven

Development in County Areas and Opinions on Promoting Urbanization Construction

with County Towns as Important Carriers.

The county economy, as a fundamental unit of the national economy, has substantial

potential and reform capacity. Since the inception of the era of reform and opening up,

certain county economies, such as Southern Jiangsu, Yiwu in Zhejiang, and Jinjiang

in Fujian, have harnessed their local comparative advantages effectively and have

developed growth paths that align with their unique characteristics. These counties

demonstrate that the achieving high-quality development in county economies requires

moving away from traditional resource-intensive models. Tailored policies based on

local conditions should be implemented to unlock economic potential and promote

innovation-driven development at the county level.

Protecting intellectual property rights (IPR) is important in order to improve the

determination and confidence of market entities in pursuing innovation and development.

It is essential to respect and protect IPR in order to cultivate competitive advantage

and to foster a strong brand economy. The Top 100 County-level Intellectual Property

Competitiveness Report (2022) indicates that regional imbalances in intellectual

property competitiveness among China’s county-level regions remain significant.

Nonetheless, the southwest, northeast, and northwest regions possess substantial growth

potential. Most counties nationwide lack patent agencies and agents engaged in related

services, indicating that service capabilities for county-level IPR need to be enhanced.

It is therefore important to assess the effectiveness of IPR policies in promoting county

economic growth and to clarify the underlying mechanisms. By doing so, we can

achieve a better empirical understanding of how policies for IPR contribute to advancing

county economies, offering valuable policy insights and evidence to guide further

development strategies.

The literature relevant to this study explores two focus areas. The first concerns

the determinants of county economic development. Scholars have identified various

factors that serve as determinants of economic growth, including factor input (Solow,

1956), division of labor (Young, 1928), human capital enhancement (Lucas, 1988),

technological progress (Qin et al., 2023), regional policies (Huang et al., 2023), and

finance (Xiong and Li, 2018).

© 2024 The Author(s). China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License,

which permits use, distribution and reproduction in any medium, provided the original work is properly cited

and is not used for commercial purposes.

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Intellectual Property Policy and County Economic Growth 37

The second focus area is the impact of IPR on economic growth. The rise of

institutional economics has highlighted the importance of institutional factors, such as

property rights and legal systems, as key determinants of economic growth. Among

these institutional elements, IPR, as manifestations of intellectual achievement, function

like tangible assets and exert significant influence on production and transactions.

Although researchers have investigated the impact of IPR on economic growth, their

findings have yielded inconsistent results.

On the one hand, safeguarding IPR has been observed to create an environment that

is conducive to innovation and to research and development (R&D). A robust protection

framework encourages companies to allocate resources and funds for innovative pursuits

(Ding, 2008; Hudson and Minea, 2013; Liu, 2016).

On the other hand, excessive protection of IPR can lead to heightened market power

and the concomitant erosion of market competition, especially in developing countries

and regions (Dong et al., 2012). This outcome can prove detrimental to economic

growth as it escalates patent use and imitation costs for latecomer countries and regions

(Kou et al., 2021), impeding technological progress.

Researchers have primarily examined the relationship between the protection of

IPR and economic development at the national or city level, suggesting that innovative

activities are more likely to occur in urban areas than in county areas. However,

since 2013, China’s county economy has demonstrated a trend of being dominated

by secondary and tertiary industries, with the integration and development of tertiary

industries. The China County Industrial Economic Development Report (2023), from the

China Academy of Information and Communications Technology, revealed that county

economies have diversified beyond the traditional pillar industries. In these counties,

both the traditional pillar industries with their characteristic advantages and the strategic

emerging industries are thriving. This supports Li’s (1991) emphasis on “the tripartite

structure of China’s economy” – the idea that China’s economy would transition through

a phase in which the agricultural and rural and urban industrial sectors would coexist.

Townships and private enterprises contributed significantly to county economic growth

during this transition, serving as major innovators.

The county economy has become a crucial arena for innovation and entrepreneurship.

However, unlike the protection of IPR available in urban areas, the protection of IPR in

counties is not yet in place. Intellectual property infringements and disputes occur often.

Most counties lack IPR service institutions and professionals, and the awareness of these

services requires improvement. These problems restrict the high-quality development of

county economies severely. It is therefore necessary to study the relationship between

IPR and economic growth from a county perspective.

© 2024 The Author(s). China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial License,

which permits use, distribution and reproduction in any medium, provided the original work is properly cited

and is not used for commercial purposes.