Manufacturing Growth and Local Multipliers in China

We investigate the impact of manufacturing employment growth on the non-tradable sector for prefecture-level cities in China. Using the 2000 and 2010 Censuses of Population, we apply the shift-share approach to isolate the exogenous change of employment growth in manufacturing. We find that adding ten manufacturing jobs creates 3.4 additional jobs in the non-tradable sector. We also show that the effect is heterogeneous along a number of dimensions. More specifically, new jobs in high-technology manufacturing is responsible for the entire effect with low-tech manufacturing showing no significant effect. Among the non-tradable industries, the effect is largest for wholesale, retail, and catering with no effects on utilities and construction. We find that the effect is also geographically heterogeneous, with the multiplier being greater for inland provinces