Agglomeration and the local state: the tobacco economy of Yunnan, China

This paper explores the interplay of local state action with historical contingency, innovation and external economies in the world's largest tobacco-producing region - Yunnan, China. Formed in a relatively unindustrialized province and promoted by local authorities as their primary revenue base, Yunnan's tobacco economy gained a headstart through concentrated resource support and ad hoc regulatory flexibility. Its further growth has drawn greatly on intraregional spillovers of knowledge of locally based institutional innovation, which foster and enhance conventional forms of external economies. Implications for the study of regional economies are discussed.