Technology Transfer and Early Industrial Development: Evidence from the Sino-soviet Alliance

Abstract: This paper studies the causal effect of technology transfer on early industrial development. Between 1950 and 1957, the Soviet Union supported the “156 Projects” in China for the construction of technologically advanced, large-scale, capital-intensive industrial facilities. We exploit idiosyncratic delays in project completion, due to which some projects received Soviet technology and know-how, while some others were eventually realized by China alone using domestic technology. We find that the Soviet technology had large and persistent effects on plant performance, and know-how diffusion by Soviet experts further boosted firm outcomes. The intervention generated horizontal and vertical spillovers and production reallocation from state-owned to privately-owned companies since the late 1990s.