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Governance capacity, related variety and regional economic resilience under the COVID-19 epidemic: evidence from China

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Abstract

The outbreak of COVID-19 epidemic had a prolonged impact on urban economic activities. Cities with better economic resilience are more capable of resisting the shock brought by the epidemic and realizing post-epidemic economic recovery. In such an uncertain environment, both governance capability and local industrial varieties have significant impacts on economic resilience. On the basis of previous works from evolutionary economic geography and institutional studies, this study uses nighttime light intensity as a proxy for economic resilience at prefecture-level. Our findings indicate that, at least in the short term, the effect of governance capacity on economic resilience is moderated by local industry varieties. Hence, the local government may enhance economic resilience via innovation, economic development and urban governance channels, but it should follow the risk transmission mechanism of the regional industrial network. In addition, taking into account the institutional basis of China’s central-local relation, local governance capacity was compressed in the prevention and control of epidemic, mitigating its function on the long-term economic recovery.

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Notes

  1. The corresponding monthly integrated data can be downloaded freely from the Earth Observation Group laboratory website of the Colorado School of Mines (https://eogdata.mines.edu/products/vnl/#monthly). We use ArcGIS 10.8 and implement a spatial sampling interval of 15 arcseconds to aggregate nighttime light data by prefecture-level city administrative boundaries.

  2. Although some cities lifted lockdown policy in February and March 2020, Wuhan, the city hit hardest by the epidemic, returned to normal state of control in Apr 8, 2020. Therefore, we set Apr 2020 as the starting point of economic recovery for all of our sample cities.

  3. The standardized calculation formula is \({(V}_{i}-{V}_{min})/({V}_{max}-{V}_{min})\). \({V}_{i}\) represents a specific indicator of city \(i\).

  4. Corruption cases are recorded in https://www.ccdi.gov.cn/.

  5. Selected key words are listed in the Appendix Table 13. We code prefecture-level government work reports of 2017 since we believe that governance attention has long-time effects on regional economic resilience.

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Funding

This research is sponsored by Federal Employment Agency (Germany) with IAB Project Number 3929 and National Natural Science Foundation of China (Project Number 42171169).

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  1. College of Urban and Environmental Sciences, Peking University, Beijing, China

    Canfei He & Hantian Sheng

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  1. Canfei He
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Correspondence to Canfei He.

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Appendices

Appendix 1 The calculation of governance quality

See Table 

Table 6 Detailed index system for principal component analysis
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6.

Appendix 2 The correlation between governance quality and economic resilience

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Fig. 4
figure 4

The scatter plot between governance quality and resilience indicators. Note (1) We have standardized all of indicators; (2) the figure shows that there may be outliers in our sample; therefore, we winsorize our variables at 1% and 99% to reduce the likelihood of extreme values affecting empirical results

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4.

Appendix 3 The first-stage regression results

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Table 7 Governance quality and economic resilience: instrumented regressions—first stage
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7.

Appendix 4 Correlation test

See Table

Table 8 The effects of governance quality on economic resilience: A DDD approach
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8.

Appendix 5 Robustness checks

We set a typical DDD model to capture the effects of governance quality on economic resilience (proxied by nighttime lights intensity). Three groups of dummy variables should be included in our DDD model, namely the time dummies, treated-group dummies and governance quality dummies.

We regard February 2020 as the experimental period, because this month was the most severe period for epidemic prevention and control for most Chinese cities. To divide the experimental group and the control group, we refer to the data provided by the National Health Commission, which includes daily new confirmed cases and cumulative confirmed cases of each prefecture. Then, we calculate the confirm-ratio (total confirmed cases/ total population) in each city. We put the city into the experimental group with the confirm-ratio higher than the median of the full sample. Lastly, we define a city with high-level governance quality if its QoG indicator is higher than the median of the full sample. The regression results of our DDD model are recorded in Table 9.

See Tables 8,

Table 9 Robustness checks based on new governance index: direct effects
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9,

Table 10 Robustness checks based on new governance index: indirect effects
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10 and

Table 11 Robustness check: long-term recovery
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11.

Appendix 6 Text analysis based on government work reports

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Table 12 Selected key words for text analysis
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12 and

Table 13 Correlation matrix of main variables
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13.

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He, C., Sheng, H. Governance capacity, related variety and regional economic resilience under the COVID-19 epidemic: evidence from China. Ann Reg Sci (2024). https://doi.org/10.1007/s00168-024-01266-1

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