Economic Openness, Industry Agglomeration And Regional Economic Growth: Theoretical Model And Empirical Analysis

This paper, based on an empirical analysis of China, investigates the relationship among economic openness, industry agglomeration and regional economic growth. First of all, within the theoretical framework of New Economic Geography, a theoretical model of openness, the growth of regional economy, and industry agglomeration is constructed. Through mathematical analysis, we illustrate that openness will accelerate the formation of industry agglomeration, and the imbalance of industry agglomeration in space will enlarge regional economic gap persistently. Secondly, this paper analyzes systematically the inherent mechanism and logic relationship among the growth of regional economy, industry agglomeration and openness of China. Openness will upgrade the centripetal force of industry agglomeration with the deepening of the division of labor, factor accumulation, and technology progress. Industry agglomeration will promote the growth of regional economy with market scale effect, external effect, learning effect and so on. Meanwhile, foreign trade and foreign direct investment will promote the growth of regional economy. Thirdly, this paper also offers a statistical description of industry agglomeration and regional economic gap within the context of openness in China. We find that the degree of openness in eastern areas of China is much higher than that in the middle and the western part of China, and most of foreign trade and foreign direct investment are concentrated in eastern areas. Consequently, the economic centre of eastern coastal areas gradually came into being, with an apparent agglomeration of manufacturing industry. This leads to the expansion of regional economic gap among the east, the middle and the west of China. In addition, this paper, using structure function, makes an empirical analysis with the cross sectional data of 283 prefecture-level cities in 2005, and a case study of Dongguan City, the typical example of China's openness. Both analyses support our hypothesis. In conclusion, this paper suggests that, under the background of openness, the factors of new economic geography will lead to the regional economic gap, because they help form industry agglomeration in eastern coastal areas, and industry development has the effect of scale economies and increasing return. Finally, this paper proposes policies from the view of the nation, eastern areas, the middle and the west areas, to offer reference for achieving the target of regional economic development in a concerted way.