China’s Semiconductor Industrial Policy and Income A Case Study at the Provincial Level

Abstract

When government directs the economy, how does human welfare fare? This research narrows the scope of this question to explore the relationship between industrial policy and human development indicators through the context of China’s semiconductor industry and average income from employment from 1999-2019. While both the literature on industrial policy and China’s State Council’s guidelines suggest that the driving force behind semiconductor policy is the pursuit of economic growth, results suggest that the policies, as executed, bear limited significance to income increases over time. However, analysis does provide some key insights into the effectiveness of policy variations: 1) “national guidelines” accompanied by state investment vehicles are more effective than the just the publication of the former and 2) investment into historical Chinese industrial geographic clusters correlates to higher income increases as compared to new “upstart” semiconductor provinces.