Reform And Opening Up The Market Segmentation And Economic Growth

Though it is always said that China's domestic market segmentation depresses economic growth, few papers have done this econometric test, then to do such test becomes the biggest contrubition of this paper. Based on a comparison of different methods evaluating domestic market segmentation, we choose an index of interregional market segmentation using regional CPI of consumer goods. With this index as one of independent variables, we establish the econometric model accounting for economic growth. Using panel data from 1985-2001 of 28 Chinese provinces, this paper finds that market segmentation has a reverse U shape effect to the economic growth. After adding variables stands for inter-influences between the reform, opening and market segmentation, we find the reform and opening up policy can mitigate the degree of segmentation, which leads to the total positive efffect of market segmentation to economic growth. As a conclusion, sustainable economic growth needs to deepen reform and opening up policy.