Do Border Effects Alter Enterprise Resource Allocation Efficiency : Empirical Evidence from Municipal Districts in China

In this paper, we draw upon a quasi-natural experiment in China’s reorganization of municipal district borders to explore how border effects within a city alter enterprise resource allocation efficiency. To improve metropolitan functioning and competitiveness, the government of China merged or disintegrated several municipal districts on a large scale during 2000s. Employing a difference-in-difference approach and the data envelopment analysis method, we show that border reorganization significantly improves enterprise resource allocation efficiency; and that the primary mechanisms are industrial intensification and specialization. This implies that borders within cities are important and enable use of border effects as an effective tool in optimizing the quality of urban development