Study On The Effects Of Transaction Costs Of China’s Manufacturing Industry Agglomeration

Since China’s reform and opening up, China’s manufacturing industries keep agglomeration to the eastern coastal areas, which make the east, midland and west regional economic development difference expand. According to push-by-step theory, with the passage of time and the product life cycle theory of life, the industry should transferred from the high gradient area to the moderate regions. But having checked out the research about China found that the fact is not what it should be. So in order to narrow the difference of regional development, it is necessary to research how to make the industry transfer to the central and western regions.New economic geography thinks that the relationship between Industrial agglomeration and transaction cost is inverted u-shaped relationship. We can see that when the transaction cost reduces to a certain degree, industry dispersion will happen. Based on this we are going to study the effect transaction cost to China’s manufacturing industry agglomeration.The paper is based on the theory of new economic geography, by building a model, use panel data regression method to analyze the influence of transaction costs of China’s manufacturing industry agglomeration. According to the results of empirical study, the following important conclusions can be drawn like this:With the decrease of transaction costs, manufacturing is still in the event of a cluster, and China should further reduce the transaction costs, to make manufacturing agglomeration reach the top of the inverted U curve as soon as possible.The paper has a total of four parts. The first part is introduction. In this part, we first introduced the selected topic background and the topic of this article. Then combed and analysis of the literature of the impact of industrial agglomeration of transaction cost.The second part introduces the theoretical basis of industrial agglomeration effect of transaction costs. This paper expounds the basic principle of new economic geography, and deduces the relationship between transaction cost and industrial agglomeration of inverted U curve.At the third part, we make an empirical analysis of the impact of the transaction costs on China’s manufacturing industry agglomeration. First we build the relationship between transaction cost and industrial agglomeration model; we calculated and analyzed the transaction cost in China. In order to make up for the shortcomings of previous research, this article not only select transportation costs to measure the transaction costs also chose the degree of market integration to measure the transaction cost in China. Finally we built30provinces and cities nationwide,2000-2011panel data, and use EViews software empirical the effect of transaction costs of China’s manufacturing industry agglomeration, the results showed that with the decrease of transaction costs manufacturing is still in the cluster, and industrial agglomeration is still in the left of the inverted U curve. The forth part is conclusion and policy recommendations. According to the result of regression, we get the main conclusions of this paper, and give some advice on how to make the industry move to the Midwest.