The Theory And Empirical Study Of Endogenous Urbanization In The Western China

Urbanization is the only path to modernization. So far there has not ever been a single country or region that becomes medium or high income economy without going through urbanization. On March 16, 2014, the State Council issued the New Urbanization Plan(2014-2020). It clearly presented three important issues, one of which is the concern of urbanization of central and western regions. In addition, in the Fifth Plenary Session of the 18 th Central Committee of the Communist Party, the new system of open economy strategy has incorporated Silk Road economic belt, covering nine major western provinces, Xinjiang, Gansu, Qinghai, Ningxia, Shaanxi, Chongqing, Sichuan, Yunnan and Guangxi. Under this policy, urbanization in these areas will greatly enhance their competitiveness, and help to extend the Silk Road economic belt. However, the reality is that there are lots of less-developed areas in China's western region, where the urbanization rate has lagged behind the eastern. Research on the causes of its urbanization and the promoting mechanism has great academic significance as well as significant meanings for practical development.The specific contents are as follows. Firstly, fundamental theories for this thesis include urban agglomeration, population transfer and public goods. Besides, a literature research has been conducted on studies about respective relationships between three-industry development and urbanization, and human capital accumulation and urbanization, as well as those on problems in the process of urbanization in China. Secondly, after sorting out the characteristics of industrial development and urbanization, the connotation, driving forces and conditions of urban agglomeration, a mathematical model is constructed to describe the inherent mechanism among the industry development, human capital accumulation and urbanization development. This baseline model is then applied in the analyses of endogenous issues in the urbanization process of western China. Thirdly, on the basis of the mathematical model, a panel vector autoregression model(P-VAR Model) is built for the empirical analysis of integration between industry development and urbanization in western areas. Fourthly, with related the theories, the dynamic relationship between human capital and urbanization is studied through the cointegration analysis and error correction model. Lastly, with those previous findings, the author dicusses related mechanizams concerning integration between industry development and urbanization, human capital accumulation, and the policy mix for the endogeneity of urbanization.The main findings are as the followings. Firstly, an endogenous urbanization has been established covering industries, human capital and urbanization. It is thaken as a baseline for further analyses. This theoretical model shows that endogenous urbanization based on free movement of production factors is sustainable. Under this condition, industry development and urbanization can be positively integrated, while human capital accumulation and urbanization positively interacted. Secondly, the baseline model has been applied in the context of western China. Both the theoretical model empirical results show that, among the three industries in western China, agricultural development has negative effects on urbanization, which is a "reverse urbanization" effect. However, urbanization a positive effects on agricultural development. Industrialization and urbanization have a significant convergence effect, while there is no such effect between service industry and urbanization. These results may be highly attributed to family-owned agricultural production, land policy designed for attracting investment and business, household registration system and restrictions on land circulation. Thirdly, a combination of theoretical models and empirical studies reveal that urbanization in western China has significantly promoted the human capital accumulation, but the latter has no such influence on the former. One main reason may rely on that our country's urbanization is not endogeneous out of free flow of production factors such as human capital. Lastly, the optimization mechanism design of urbanization assumes that local government takes employment as the major aim of urbanizaiotn development. Two policies, rents preferential and public goods supply are added into a standard real option model. It shows that, with urban agglomeration effect, the rental will be lower with more companies coming into the city. Meanwhile, government will gather more funds for public goods and service supplies as well. Thus the model can well integrate the function of marketplace(invisible hand) and government policy(visible hand), and then make a clear boundary between them.This study has the following policy implications. Firstly, following basic rules of urbanization with market-oriented rather than government-led management, an endogenetic urbanization mode can be implied. Secondly, with respect to original endowments and comparative advantage, industries with comparative advantages should be given priority, and urbanization be built on industry development and full employment. Thirdly, as to the "reverse urbanization" in agricultural development, the current land system should be revised to enhance scale effect and intensive operation in this industry. Fourthly, the land finance should be carefully rexamined. Lastly, the public service management system is encouraged to be innovatedly reshaped in favor of human capital flow.