Capital Constraints, Labor Endowment And Vertical Gather Under The Zhejiang Industrial Location Choice

Although lack of natural resources and national preferential policies, Zhejiang province has experienced a "Zhejiang miracle", the economic growth greatly exceeds national average level since the reform and opening up policy, local residents also enjoy a great amelioration in living standard.During the growth, many economic entities based in county level has come into being, these economic entities, which produce differential products, have large production scales and command national even global advanced production skills. This "one county one product" economic mode with local characteristic boosts quick economic development in Zhejiang province.Since 1990's, economist led by Paul Krugman founded the New Economic Geography theory. They proved that economical agglomeration results in increasing return of scales and advances in productivity, thus they reveal the reason why economic activities tend to concentrate. Zhejiang province has scarce capital factor, abundant labor force and popular family economic mode, these initiatives help establishing the vertical agglomeration production mode in Zhejiang province, which is to participate in vertical division and carry out export trade under county level. Vertical agglomerations greatly improved the productivity and gradually established competitive advantage in many counties. According to Gene index of different industry in Zhejiang province, we proved that industry selection changes with the flow of scarce factors.China is also experiencing its sector economical restructure; central and western China has the similarity among initiative gifts, history and policy support with Zhejiang province, development in Zhejiang is instructive in terms of industry selection and solving of unbalanced development in central and western China.