Study On Regional Equality And Welfare Compensation Mechanism Under Open Economy

Since the opening reform, China’s regional disparity has undergone a change which started from a short shrink and then continuous expansion. Along with such progress are the agglomeration of economic resources in eastern coastal areas and the rise of the opening level. This situation is not only against the social equality, but also adverse to the increase of the overall economic efficiency, and will inevitably do harm to the sustainable development in the long run.To design and enforce an effective welfare compensation mechanism has both theoretical and realistic significance which is fundamentally important to the reduction of regional disparity and the improvement of the overall economic efficiency in China. The topic related to Welfare Economics, Public Economics, Regional Economics, Spatial Economics and New Economic Geography. Among them, New Economic Geography gives out the most persuasive explanation. Although the current literature had researched various different welfare compensation mechanism from different terms, but there still has not an integrated, overall research framework, let along to apply such framework to the open economy with Chinese characteristics.Considering all these realistic and theoretical holes, this article applies a core-periphery model in terms of New Economic Geography to the open economy of China. It analyzes and compares the functional pattern of different welfare compensation mechanism, which include potential transfer payment and industrial shift, under the condition of symmetrical and asymmetrical regional opening level respectively. Then it gives out conclusions by numeric simulation. This article has5chapters. Chapter1is introduction. Chapter2is literature review. Chapter3is open CP model. Chapter4is the analysis of regional equality and welfare compensation mechanism. Chapter5is conclusions and possible directions for future research.The major conclusions of this article are as following:First, basically, when the degree of domestic market integration is relatively low, industrial shift and support is more suitable to narrow regional gap and improve economic efficiency. When the degree of domestic market integration is high enough, potential transfer payment is more suitable.Second, under the condition of symmetrical opening, the increase of domestic regional opening degree will contribute to the effective implementation of those two compensation mechanism.Third, under the condition of asymmetrical opening, the increase of domestic regional opening degree combined with the absolute or relative expansion of domestic opening disparity will inflict difficulties on the effective implementation of those two compensation mechanism. However, the expansion will possibly enlarge the scope of the enforcement of industrial shift and support.The possible innovation of this article are:first, this article initially puts the analysis and comparison of each compensation mechanism together in a unified background of open economy; second, it initially processes these analysis under the condition of asymmetrical regional opening level in China.With the limitation of capability and paper length, this article has several shortages:first, it is lack of the empirical test on the primary concludes; second, it neglects the dynamic welfare improvement contributed by economic agglomeration and endogenous growth; third, it also neglects the welfare compensation effect caused by the other production factors, such as capital, land and entrepreneur.