An Inframarginal Analysis On Regional Disparity

With a gradual transition of the economic system, China's comprehensive economic level makes great development after the reform and open door policy. At the same time, however, the regional disparity of economic development between the eastern and the middle-western is still enlarging quickly. So how to promote the fast development of middle-western region's economy and then reduce the regional disparity has becoming a great challenge for us to harmonize the regional economy and deepen the reform of socialist market economy. Simultaneously, this kind of live background in China also provides a very enlightening idea to research and explain the economic rule in the phenomena of regional disparity.This paper follows the above-mentioned research idea in analyzing regional disparity. Firstly, it sets up an evolutional configuration of regional division of labor in new classical economic framework by introducing the concept of specialization and transaction cost. Secondly, via an inframarginal analysis on rigonal disparity in economic development, it explains the logic relationship between the evolution of division of labor and the transaction efficiency which is determined by the environment of institution. On the basis of the theory, this paper demonstrates that the different evolutional paths of transaction efficiency between two regions are the most important driving power for the development and change of regional disparity in per capita real income. Thirdly, this paper validates the conclusions of theoretical analysis using the empirical evidences of China, and suggests that it is very important for middle-western area to reduce regional disparity by deepening the reform of market economic system and trying to improve the innovation environment of institution.All in all, this paper breakthroughs fetters of the traditional Neoclassical framework and the effect of economies of scale, and formalize the idea by mathematical model which indicates that the institution has a great effect on the economic growth. Therefore, the theoretical analyses of this paper not only enrich the views and methods in researching regional disparity, but also provide many original and innovative opinions in explaining the economic rule of regional disparity. The conclusions of this paper's research offer an important theoretical support for the middle-western area in China to lessen the economic development gap with the eastern area through rapidly improving the level of transaction efficiency and commercialization.