China's Economic Behavior Regional Distribution Theory Testing

In this paper we analyze a common problem in economic geography:why some region can maintain their prospectus status for centuries while other regions struggle hard to live against poverty? Will a large shock result in a new equilibrium for the economy?By introducing three different sections in this paper: analyzing the evolution path of regional population densities for the last2000years in China, using Markov transition matrix for a deeper data mining towards the2000years regional population density data and introducing a very influential shock in China history, that is the1959-1961Great Famine, to investigate whether a big shock can cause a permanent influence to certain region so we can further distinguish random growth theory and local fundamental theory, we get rich empirical evidence in the Chinese case. Then we match these empirical results with the predictions in three mainstream theories in economic geography, which are increasing return theory, random growth theory and locational fundamental theory. We find that locational fundamental theory has the most powerful explanation for China’s over2000years distribution of economic activity across space. That means shocks only have temporary influence towards region sizes and for a long run the innate natural endowment determines the region size to a large extent.