The Accumulative Effect And Public Policy

The increasing development disparities between regions and cities in China are as impressive as its economic growth miracle since late1970s. Capital, labor, and economic activities in China have been concentrated significantly to its coast areas and urban sectors. For instance, the GDP ratio of east area increased from less than50%in1970s to nearly60%in2008, while that of central and west areas decreased from30%and20%in1970s to24%and18%in2008, respectively. The Yangtz River Delta, the Pearl River Delta, the Bohai Gulf area, and other coast areas have attracted most foreign and domestic capital flows and the emigration from central and west China has also been absorbed by the east coast regions. In addition, the agglomeration process of China economy also takes place towards the urban sector, evidenced directly by the remarkable urbanization rate in China increasing form less than20%in1970s to about50%in2010.Based on a brief review of the history of China’s regional and urban development and policy evolution since late1970s, this thesis tries to answer three questions in perspective of agglomeration and its effects on public policies. First, what’s the role of market potential, which is determined by the city system, in China’s regional unbalanced development? Second, do China’s policies trying to rebalance the regional development have any real effect? To answer this question, we focus on the special-economic-area policies, which have been implemented in east areas since early1980s, facilitating economic growth in these areas successfully, and then were copied to central and west areas to reduce the regional development gap. Third, what is the key policy to advance the agglomeration benefits and in China?In Chapter4, we use the city-level aggregate data of service industries to analyze the factors affecting agglomeration and wages of service industries in China, emphasizing the impact of city-level market potential which measures the local market size and access. We find that services are averagely0.1%more agglomerative in cities with1%higher market potential and the impact of market potential on service agglomeration is largest in east area, smaller in central and west areas. If the market potential of a city increases by1percent, the average service wage in this city increases0.181%averagely, and this effect is strongest in a west city, weaker in a east city and not significant in a central city. The differences of urban system between east, central and west areas may be an important cause of the regional differential of market potential impacts. The roles of other urban and industrial characteristics in the determinants of service spatial distribution and wages are also investigated.Using a unique data set including all industrial SOE’s and large non-SOE’s, we evaluate China’s regional development policy regarding its effect on the number of new manufacturing firms in cities in Chapter5. The poisson regression model is applied and our empirical results show that the state-level special-economic-area policies indeed increase the number of new manufacturing firms, including new foreign firms, even after controlling the city-level market size, industrial agglomeration, distance to ports, road and transport conditions, and other factors. Such effect is most significant in west cities, and weaker in east cities, but not significant in central cities. The results also confirm that industrial agglomeration and market size are both important determinants of manufacturing entering, which implies that the east cities which have higher market potential and industrial agglomeration still have huge advantage in attracting manufacturing firms.We construct a theoretical model in Chapter6to analyze three important problems of urbanization in China in a unified framework:within-city inequality, under-urbanization, and urban economic growth. Our model emphasizes the costs of potential conflicts caused by the in-fact income disparity between the urban natives and the rural-to-urban immigrants, which is the result of providing urban public services to natives exclusively. We prove that, in the early stage of urban economic growth when the losses of potential conflicts are relatively small, the exclusive urban public service provision may be beneficial to them, but the losses under such unequal public service provision policy increase in the process of urban growth, and after a certain stage of development, opening public service access equally to the immigrants will be a better choice, even only the natives’utility is considered. Such an endogenous policy change not only decreases the with-in city inequality and conflicts, but also advances the urbanization and urban economic growth.