# **Table 1. Definitions of Key Variables**

Definitions FDI share of foreign ownership in a firm averaged at the district level ln(L) Ln(district average of the number of employees in a firm) ln(firm age) Ln(district average of firm age) ln(GDP PC) Ln(city-level GDP per capita evaluated at 2004 Yuan) ln(city distance to port +1) Ln(City's distance to the port+1) City phone density City level average number of phones per 100 people. ln(city average wage) Ln(city-level average wage per employee based on city survey), wage evaluated at 2004 Yuan. district average share of college District-level share of employees with college or above education.

district average share of college District-level share of employees with college or above education. graduate in L City share of good air days Share of days in the city that the quality of air reaches a specified threshold (to be judged as good or ok). dummy: open city Dummy of initial open cities, including Shenzhen, Zhuhai, Shantou and Xiamen. ln(days passing customs) Ln(district-level average of the number of days for import to pass customs plus the

- Ln(district-level average of the number of days for import to pass customs plus the number of days for export to clear customs).

- dist avg of private firm access to The average share of private firms with access to loans within the district. A firm is loans defined to have access to loans if it has borrowed bank loans in the past three years.

- dist avg of private firm ETC The average ETC burden of domestic private firms within the district. ETC burden is

- The average ETC burden of domestic private firms within the district. ETC burden is a firm's expenditure on entertainment and traveling over sales.

- dist avg of foreign advantage in District average ETC burden for domestic private firms over district average ETC ETC burden for foreign firms minus one.

- dist avg of private firm contract enforcement

- dist avg of foreign advantage in contract enforcement

dist avg of private firm tax burdens

- The average of the perception of domestic private firms on the protection of contractual rights within the district. A firm's perception is based on the firm's answer to the following question: for commercial and other disputes that your firm has had, what is the likelihood that the company's legal contractual and property rights is protected?  The answer lies between 0% to 100%.

- District average perception of contractual rights protection for foreign firms over that for domestic firms.

- The average tax burden of domestic private firms within the district. Tax burden is defined as the summation of all types of taxes divided by sales.

- dist avg of foreign advantage in tax District average tax burden for domestic private firms over district average tax burdens burden for foreign firms minus one.

- A dummy variable indicating that the age of the party secretary is younger than 47 years old (25 percentile)

PSyoung A dummy variable indicating that the age of the party secretary is younger than 47 years old (25 percentile) PSold A dummy variable indicating that the age of the party secretary is older than 53 years old (75 percentile) PS tenure Average job tenure for the recent three party secretaries (in years) 26