Comparative Advantage, Home Market Effect And Producer Services Agglomeration

Following the transition of the world economy from industrial-based economy to service-based economy, the service industry has developed quickly and presented the centralized development trend, and the agglomeration of producer services has gradually come into the sight of research of scholars. The researches of manufacturing industrial agglomeration suggest that there is the home market effect in manufacturing industry. Whether there is the home market effect in the producer services which mainly serve the manufacturing industry? What is the main reasons of industry cluster? How to make the location choice according the industrial characters.Based on the thought, this paper firstly analyzes the causes of industry cluster of producer services from the sight of comparative advantage and home market effect with the economic theories. On the basis, by borrowing the model to analyze the industry cluster in the new economic geography, it rebuilds a model which is more suitable to analyze the agglomeration of the producer services. The model is improved according to the input-output relations of producer services and manufacturing industry and the own industrial characters of the producer services, with the cost of information transfer instead of the cost of long-distance transport, and show that there is the home market effect in the producer services.After that, to further expand, by introducing the factors of comparative advantage, it investigates the relations between the comparative advantage and the home market effect, and the influence on the agglomeration of producer services. The paper puts forward the hypothesis according the conclusion of the model inference, that the height of the cost of information transfer is an important factor which influences the differences of the causes of the producer services' agglomeration. When the cost of information transfer is low, the agglomeration of producer services is dominated by the comparative advantage, while the agglomeration of producer services whose cost of information transfer in the middle range is dominated by the home market effect.Then, by borrowing the econometric model of Davis and Weinstein(1999), the paper carries out a empirical test on the hypothesis with the input-output data of the producer services'sub-sectors of 29 provinces and cities in China in 2007. At last, aiming to the shortages of the centralized development of producer services, the paper proposed relational policy and suggestions.