Research On China's Domestic Market Integration: Based On The Border Effect Model

Since China adopted the policy of reform and opening in 1978, China has gradually gone into the road of market economy. The operation of the market economic system has brought boundless vitality into China's economy. Instead of the planning system, the marketing system became the important means allocating the resource; as a result, it improves the economic efficiency greatly. China's overall economic strength has been continuously enhanced, and people's living standard also increases remarkably, and as a big economic country, China has attracted the world's attention. However, along with the successful fruits of economic reform, some problems have emerged gradually; especially the problems of the local protectionism and market segmentation have been the concern of the scholars at home and broad. So breaking the market segmentation and eliminating the local protection act can advanced the process of the market integration and promote the growth of China's economy.Many scholars at home and abroad have done some research on the extent of China's market integration, as they selected different methods, the conclusions inconsistent. Some scholars believe that the integration of China's market is in the lower level, also they think that China's market-oriented reform is unsuccessful; some scholars believe that along with the operation of the market mechanism, the integration of the Chinese market has been continuously deepened. Based on the merits of scholars, this paper will do the empirical analysis on the extent of the Chinese market integration using the border effect model and the data of the inter-regional I-O tables of China, through the analysis we can provide some valuable policy recommendation to speed up the process of China's market integration. This paper is divided into the following four parts:Chapter I, Review of the Literature. Review the literature of the domestic and international research on the market integration, and sum up the review of border effects literature. Based on these researches, we try to find the researching ideas in the paper.Chapter II, Introduce the border effect model. Derive the border effect model in this paper, and give the method of calculating distance intra-regional and inter-regional distance.Chapter III, Study the market integration in China. First, using trade flow data of inter-regional input-output table in eight regions of China, analyzes the economic ties between the regions and the integration of markets, and then using the border effect model and trade data in the input-output tables, we do empirical tests about Chinese market integration. Chapter IV is the conclusion and policy recommendations.