An Empirical Research On Chinese Interregional Market Segmentation And Technology Disparity In The Open Economy

Reviewing China's development course after thirty years'reform and opening-up, we find that the development of Chinese economy profits from the advance of Total Factor Productivity, which is generally considered the technological progress. However, China is broad and has many provinces, and the government of every province takes some measures, such as restricting the regional technical intercourse and contorting the factor flow, for the sake of the profit of its own province. Finally, it becomes the market segmentation, which blocks the economic development. With the market segmentation aggravating, the development of regional technology becomes more unbalanced, the technological progress of backward regions is restrained and the interprovincial technology disparity is enlarged.Using the Chinese provincial panel data from 1992 to 2007, this paper explores the domestic market segmentation and interprovincial cooperation in China, which shows that the degree of Chinese market segmentation is decreasing. The paper separately uses two kinds of methods of analyzing Total Factor Productivity, which are the Solow method and DEA to make the estimation. Firstly we use the Solow method to calculate TFP of every province, as the general technological progress. As Xu Zhenhui(2006),Li and Xu(2008), the paper defines the technology disparity(GAP) as the rate of technology level between every other provinces and the highest province, which is from 0 to 1, and then uses the standard logit model to test the interprovincial technological convergence. On the basis of this, analyze the mechanism of market segmentation and economic opening affecting interregional technological disparity. We use the TFP of every other province to compete with the highest province, Fujian and formulate the model of determinants of the technology disparity. Then, this paper measures, applying DEA ,the technological efficiency, the technological progress and Malmquist productivity index in 28 provinces in China from 1978 to 2001.The result shows that TFP increase of the nation, the coast and island are all due to the technological progress. Meanwhile, there is a difference between the coast and island, but the difference is narrowing gradually. It further testifies empirically the relations between the Chinese market segmentation, FDI, export, R&D, infrastructure, the degree of marketization and the technological progress and the technological efficiency. Empirical findings suggest that, the total factor productivity of every province has increased, the technological efficiency has decreased; the coast and island show the convergence of technological progress; market segmentation impedes the technological advance in the backward areas and exacerbates technological disparity, provincial cooperation is propitious to increase the technological progress and narrow the technological disparity; expanding export and improving the share of attracted investments are conducive to the technology convergence in backward areas. Research and development and market-oriented reforms also play a positive role in accelerating the technical progress and narrowing the technology gap.