Economic Agglomeration And Regional Economic Growth: Theoretical Discussion And Empirical Study

In the world's economic history, agglomeration is a common economic phenomenon. Since reformation of China, the agglomeration in Southeastern coastal areas, especially in the Peal River Delta and Chang River Delta, has the modern industrial and service characters. These places are the areas for the cluster of capital, labor and technology, and the gathering of FDI and headquarters of international firms. Such agglomeration brings in not only the development of industries and economic growth of location or the whole country, but also the regional gaps in different region.Research on the economic growth and regional disparity in the new-classic economic theories, the micro foundation is laid on the assumptions of unchanged scales and complete competition. They overlook the space factor and see the world as a "smooth" economic body, without the reasonable explanations to the existence of the Town and spatial agglomeration of resources or industries. So the agglomeration and regional disparity are hard to be explained under such assumptions. This paper uses the spatial theory to explain the relationship between economic agglomeration and regional economic growth, site out the factors with experiential examples.First of all, this paper constructs the micro-structure in theory. Based on the model built by Baldwin, R.E., Martin, P. and Ottaviano, G in 2001, it studies the circular causality relation of economic agglomeration and regional economic growth on the assumption of increasing returns to scale. It shows that the increasing returns to scale make economic growth push the economic agglomeration, and vice versa. Such circular causality makes the growth rate of the center region in the core-periphery system higher than the same in the symmetric system, which will bring in larger regional gaps. Then following the thoughts of Fujita, M and Thisse (2003), it shows the human capital's agglomeration will push the growth of products diversity, and so forth to push the growth of economy, finally leading to larger the regional gaps.Secondly, the paper studies the agglomeration of factors and sectors in regions of China, and its relation with regional growth. It studies the spatial diversion of labor and capital of China from 1985, builds up a model of TFP Growth using the productive functions, calculates the scale elasticity of labor and capital agglomeration by decomposing the TFP growth . It discovers that such elasticity is different in the TFP Growth between east and west regions of China, so as the technology innovation's contribution in the TFP Growth of different provinces, which leads to the TFP Growth difference in the east and middle regions of China. Then, it uses the CR Index, Spatial Gini Index and the E-G Index to study 20 sub-sectors in China's industry from 1993 for its industrial agglomeration. This study shows the industry in China is in a state of high agglomeration, and the east regions' agglomeration is much higher than the west regions. It also uses the Panel data model to analyze 20 sub-sectors in industry and 9 sectors of high agglomeration, finds that such agglomeration and scale effects are essential to the economic growth, and leading to the regional diversity and difference.Thirdly, this paper also studies the efficiency of agglomeration of factors and industry in China, as well as the effects of scale efficiency on the productive growth. Through the analysis of Malmquist index, it studies the scale efficiency and technology efficiency of factor agglomeration, compares the change of these efficiencies in different time, and finds that the agglomeration of capital and labor factors will not necessarily bring in the growth in the scale efficiency and technology efficiency. It also uses DEA method to analyze the input-output of 20 sub-sectors in China's industry, compares the scale efficiency of different sectors' agglomeration, and shows that most of these sectors in the industry are still in the stage of unchanged or grown scales. So the industrial agglomeration in the east region of China will continue.To conclude, the paper suggests the agglomeration of factors should be guided and led, so as to push the maximum efficiency in economy. It also suggests that public policy should be adopted to lead the development of industrial agglomeration, and keep a reasonable scale. Human resources capital investment should be improved, so the flow or agglomeration of such capital will be regional divided. Furthermore, the industrial structure should be modified in according to comparative advantage and agglomeration of industries should be encouraged. Finally, the distribution of industries' agglomeration should be led by the policy, so as to form a new regional agglomeration.