A Study On The Difference Between Agglomeration Economy And Regional Income

Regional economic development imbalance has always been the focus of development economics and regional economics, and regional income difference is one of the major forms of unbalanced regional development. And since the reform and open policy, the Yangtse river delta consisting of Shanghai, Jiangsu and Zhejiang has attracted lots of labors from central and western China due to relatively high income level. Therefore, the massive accumulation of labors and enterprises makes the Yangtse river delta the core economy center of China. Why the Yangtse river delta has a higher income level? What are the main determinants of regional income difference?So it is necessary to summarize and integrate the theories of traditional economics and new economic geography about regional income difference and agglomeration economy, find the correspondence of them, and make a comprehensive analysis of regional wage income difference and agglomeration economy in the background of the Yangtse river delta.The paper starts from the micro foundation of agglomeration economy, mainly based on the classical economics, new classical economics and new economic geography, discusses systematically the formation mechanism of agglomeration economy from four aspects:externality of regional division, externality based on new economic geography, externality of public goods and externality of urban agglomeration economy. Then, it pushes out a wage income equation based on a simplified model from new economic geography, which justifies the important quantitative index of agglomeration economy--market access has a positive relationship with the wage income. In order to further explore the relationship between agglomeration economy and regional income difference, the paper uses 25 cities of the Yangtse river delta as the research objects. It makes a detailed description of the agglomeration economy development from four angles of externalities, and uses the statistical data and statistical methods to analyze the income level and income difference. Finally, it carries on the empirical econometric study for the Yangtse river delta by building a panel model, using cities’ wage income level as explained variable, the externality variables and relevant control variables as independent variables.Based on the above analysis, the main conclusions of this paper are:the microscopic mechanism of agglomeration economy can be discussed from these angles at least: externality of regional division, externality based on new economic geography, externality of public goods and externality of urban agglomeration economy. The difference of agglomeration economy is an important reason for region income difference. Specific to the Yangtse river delta, a higher level of agglomeration economy determines the Yangtse river delta has a higher income level. At the same time, there exists the difference of agglomeration economy and income level between the core cities and the peripheral cities of the Yangtse river delta. Policy suggestions of this paper are as follow:to exactly grasp the connotation and mechanism of agglomeration economy, and encourage the spatial agglomeration of economic factors such as population, technology, enterprises and economic subjects, will be beneficial to increase one region’s income level. To avoid the vicious competition of agglomeration process, and promote the formation of the regional spatial structure which has reasonable rank-size agglomeration and close internal economic connection, will be beneficial to narrow regional income difference. It can be obtained from regional division of labor, market access, technology spillovers, pubic products supply and urban agglomeration to promote the level of agglomeration economy.