Study Of The Internal Mechanisms Of Agglomeration Economies

Agglomeration economy is an important research area in regional economics. The formation mechanism is one of important points of agglomeration economies research. As for formation mechanism, there are Marshall's external economies theory, increasing returns, as well as the work division theory and transaction cost theory. With the continuous development and socio-economic progress, the formation of agglomeration economies external environment has undergone profound changes, so its internal mechanism of agglomeration must change.This article holds that the formation mechanism of agglomeration economies are closely related to its market micros-structure and manufacturers'behaviors, therefore, it is necessary to study the market structure, companies behaviors, preferences and expectations and other's impact on agglomeration economies, which further revealed the formation and continuance and changes of agglomeration economies. Based on these ideas, this thesis focuses on market structure, company's behaviors, preferences and other perspectives to study the formation and the evolution of agglomeration economies. This will help our country to explain the formation mechanism of agglomeration economies, so as to provide policy advice and assistance. Specific research and conclusions are as follows:Firstly, this article extends the theory of Marshall's external economies, systematically descript and analyze the micro-structure in which the agglomeration survival, set up a theory for sub-market structure and its relationship with external economies theory. Because have extended potential sources of agglomeration, the agglomeration effects is not limited to the medium-product market, the labor market and technology exchange market, but extended to a broader range, so that the formation mechanism of agglomeration economies theory will on a more broader basis.According to thesis,different manufacturers enjoy different types of externalities from different sub-markets, and different vendors contribute different externalities for different sub-markets, because manufacturers in different scale, technical level and so forth, they enjoy and contribute different degree of externalities, therefore, manufacturers and externalities of sub-market interact, that is, different externalities affect manufactures'behaviors, conversely, manufactures'behaviors affect sub-market externalities.Therefore, the whole market's externality is the combination of all manufacturers'contribution and for a specific manufacture, its total externality is superposition of all sources of externalities. Study shows that: the interaction between micro-structure of internal market and manufacturers'behaviors is a foundation of agglomeration formation, and also reveals that small-scale enterprises contribute much externality to agglomeration economies, so government should pay attention to protect and foster those small enterprises. Secondly, this article analyses the performance of vendors with different levels of scale, different technology. In a same market, different vendors exchange externalities of different sub-markets which they need, therefore, they all complementary in externalities and reach to utility maximization, thus the micro-foundation of long-term coexistence of different scale and technology vendors. The study also shows, the coexistence of certain number of different size,different technology manufacturers, number maintenance of small firms and relatively lower-tech vendors are necessary condition for the formation of agglomeration.Specifically, manufacturers of different sizes absorb different kinds of externalities to achieve complementarity; small companies, medium-sized companies and large companies can meet their own externalities demand and tend to agglomeration. Different technology vendors have adverse selection behavior in technology externality, through game model analysis, studies show that high-tech firms have incentives to leave the economy with not high technology, and they may transfer to the same technical level location or choose to live alone; because low-technology enterprises can gain higher quality technology externality from agglomeration, they prefer to agglomerate,. In order to avoid the adverse effects of adverse selection, agglomeration economy has a self-regulating mechanism, in this paper, I put forward the view of a technical-level structure, agglomeration chain and technology evolution theory. This article reveals there is technical level structure inside agglomeration economy-a unique internal structure, the paper elaborate on the technical level structure, agglomeration chain and technology evolution theory, we holds that through the technology evolution process and the dynamic evolution of chain, it can gradually improve the whole environment's technology level and technology spillover, thereby reducing the motion of high-tech manufacturer to left.Study shows that improvement of all technology levels of chain including two points: one is that improvement in technology must be done for all the chain, in which the most important technology upgrading is in large number of low-tech small firms in the bottom level; another thing is that maintaining a certain number of the bottom vendors is necessary and important. If the bottom number of venders atrophy, the top will shrink and the chain will atrophy, eventually cause the whole economy to shrink, increasing returns to scale and external effects are rapidly reduced, agglomeration economies are likely to face difficulties. Third, the thesis discusses market structure relate to the agglomeration market and non-agglomeration, analysis shows that agglomeration is similar to a geographical monopoly, we call it "agglomeration monopoly", which is a geographical oligopolistic. This pattern increases competition among internal vendors, they universally access another kind of "excess profits", which is the another foundation of agglomeration formation. "Agglomeration monopoly" obtains excess profit by reducing merchandise cost through reinforcing internal competition otherwise by increasing sale price directly. It is a more effective market structure. It is another resource of formation of agglomeration.Fourth, this paper, depth investigate behavior preferences of manufacturers through a game model. Choosing location, vendors will inherently dependent on the preferences of other individuals who has already choose, meanwhile, manufacturers'preferences will be other venders'reference, affect decision-making of manufacturers. As a result, manufacturers may be more willing to select other companies'gathering place, not a agglomeration of their own preferences. Significance of this part of the study lies in the fact that when government in promoting the formation of agglomeration, it should fully take into account the existence of preference of vendors.Fifth, the thesis discusses the possibility of formation of agglomeration economies in rural area. Rural areas do have advantages in tempting enterprises, such as in the management system, vendor preferences and technical division, rural areas may form agglomeration economy themselves, this provides theoretical support to our new rural construction and regional economic coordination development.Finally, based on the recent economic crisis, thesis discusses agglomeration economies transformation issue. Do a comparative analysis among Zhejiang and Guangdong from the background, transition approaches and the results of transition. By analyzing, it find that when local governments prepare to promote betterment, upgrading and transition of agglomeration economies, more moderate approach is suitable for the majority rural areas of our country, a broad-brush approach is not conducive to the localization of technology, improvement of technology and regional sustainable economic development.