The Theoretical And Empirical Analysis Of The Impact Of Local Government Behavior On Industrial Agglomeration

This paper aims to study the impact of government action on industrial agglomeration. Theoretically, we divided the government action into four areas:the supply of local public goods, the maintenance of market efficiency; the promotion of local knowledge spillover and the local protectionism. The theory of the four parts are carefully elaborated. We believe that local public goods spending can improve the local industry cluster’s development; the market validity maintenance can improve the efficiency of the market; the promotion of knowledge spillovers can effectively stimulate the production of local knowledge, while the influence of the local market protectionism is uncertain.Empirically, we selected five explanatory variables, to represent the five factors above and two control variables to design a conventional model to analyze the relationship between the local government behavior and the industrial agglomeration. Finally it establishes a fixed effect variable intercept model to check financial structure differences with panel data of31provinces in China.This model examines the relationship between the local government behavior and the industrial agglomeration by use of the panel data of31provinces from2000to2005in China, which strongly support our theoretical expectations.The result shows that the variation coefficients of public expenditure、market efficiency and knowledge spillover is positive and the variation coefficients of the local protectionism is non-significant which needs more research.