The Effect Of City Network Effects On Urban Economic Growth

Industrial division and specialization strengthen the horizontal communication between cities, the traditional urban hierarchical system is evolving into a modern network. City network system in developed countries has become more mature, cities promote each other by industry input-output association or the same industry competition. City network theory make up for the horizontal linkages between cities, which ignored by the traditional city hierarchy theory. Urban economic development and urbanization in China plays an important role in promoting the change of the Chinese city system from traditional urban hierarchical system to a modern network. So, research on effect of city network effects on economic growth and comparison of network effects and hierarchical effects may provide useful suggestions for our city development strategy and policy.This paper sets up a network effects model based on the new economic geography theory, uses the input-output coefficients of 30 manufacturing industries and a large database of manufacturing firms to construct variables of competition network and complementary network of China's cities, and examines the influence of the network effects of demand and supply to economic growth. Then, examines the competition and complementary network effects in the traditional urban hierarchy in order to identify the evolutionary trend of China's urban system from the traditional hierarchy to a modern network and to draw policy implications in the development of China's urban system. Econometric results show that although the top-down spread effects are still significant and the bottom-up market area effects are weak in China's urban hierarchical system, the horizontal network effects are more significant among cities. Specifically, the competition networks have insignificant restrictive effects on urban manufacturing growth while the complementary networks contribute to urban manufacturing growth more significantly.