The Business Cycle Of Chinese Urban Agglomerations

In1979, Chinese government carried out the policy of reform and opening up, this started the modernization of Chinese economy. The essence of the reform is the transformation of the way of resource allocation. Before the reform, allocation of resources depended on planning, while after that, the operation of the economy is directed by the price singles. Meanwhile, the institutional barriers for factor mobility between different regions had been eliminated, different kinds of factors can move freely from one region to another. The motivation of earning high returns promotes factors flowing to some important regions, which has such apparent advantages as:superior geographical environment, preferential policies and so on. The prosperities of these areas will in turn promote the developments of surrounding areas. This obviously lays the foundation for the formation of urban agglomerations.According to present literatures, most of the scholars focus their attentions on the business cycle of city, province (state) and nation respectively, However, only a few scholars study the business cycle of urban agglomerations. This paper focuses all the attentions on this problem, hoping to make mends.This paper studies business cycle of urban agglomerations from two facets: the city and the sector. As is known to all, an urban agglomeration consists of several cities, on the other hand, it can be also composed of many sectors. We want to know which factor exerts more influence on the business cycle of urban agglomeration as a whole. What is more, to describe the business cycle more specifically, this paper studies the problem at different levels:micro-level, meso-level and macro-level.At micro-level, we examine two issues. First, are there marked differences of these shocks across cities and sectors? Second, are individual micro shock more correlated along the geographical dimension-the agriculture sector in Nanjing moving with other sectors in Nanjing-or more correlated along the sectoral dimension-the agriculture in Nanjing moving with that in Suzhou? Our research indicates that correlations between different sectors within a city are higher than those between same sectors in different cities. This conclusion proves the existence of "border effect" between different cities. At meso-level, we consider the prosperities of city shock-defined as the (output weighted) sum of actual micro shock to sectors in that city. The city shock is thus the average shock to the city, taking account of "diversification" across different sectors within a city. Likewise, the sector shock is defined as the (output) sum of the actual micro shock to that sector across all cities, taking account of "diversification" of the sector across various cities. Finally, the paper turns to the business cycle of macro level and relates its properties of the underlying city and sector shock.