Paired Assistance with ChineseCharacteristics: Evidence from the“Enclave Economy” in the PRD Region

Tang Yugang, Zhang Hehe*

School of Economics, Shandong University, Jinan, China

Abstract: Paired assistance is an important means for developed regions to help lessdevelopedregions achieve common prosperity. Despite its advantages, governmentmandatedpaired assistance tends to be less effective due to the lack of economic incentivesfor assisting localities. Therefore, local governments in China have explored an incentivecompatiblepaired assistance model. Based on the paired assistance between cities in thePearl River Delta (PRD) region and the eastern, western and northern parts of GuangdongProvince, this study designed a natural experiment for the network relationship of pairedassistance. Empirical results based on industrial and commercial registration data and landtransfer data indicate that paired assistance has enhanced bilateral investment linkages,and that the inter-regional benefit sharing mechanism has incentivized assisting localitiesto provide paired assistance. Our heterogeneity analysis reveals that a shorter distancebetween assisting and beneficiary localities may lead to better results of paired assistance.This study contributes to the understanding of incentive mechanisms for local governmentcooperation and offers insights for balancing regional development and achieving commonprosperity.

Keywords: Paired assistance, enclave economy, inter-regional benefit sharing

JEL Classification Codes: H77, O22, R58

DOI: 10.19602/j.chinaeconomist.2024.07.05