The Theoretical And Empirical Study Of Financial Development's On Regional Specialization In China

As the important indicator of economic structure, regional specialization has an essential influence on the transformation of regional economic development pattern, which becomes the core of current research. The appropriate level of regional specialization means that each place effectively focuses limited resources on the industry or sector with comparative advantage, which makes the division of labor deeper among regions. The financial sector which acts as the main subject of resources allocation is an important determinant of regional specialization, but its impact depends on the level of financial development:Under the higher level of financial development, the scarce and profit-driven financial resources will flow to competitive industries among regions, which will result in this pattern of regional specialization of gathering competitive industries. While under the lower level of financial development, financial system will not have a positive impact in price-discovering and information recognition mechanism. Thus, heterogeneous industries tend to obtain homogeneous financial services, leading to inefficient allocation of resources, thereby slowing the process of regional specialization.At first, we illustrate the mechanism of financial development on regional specialization from the perspectives of capital formation, capital flow, risk sharing, information disclosure and factor mobility. Then, depending on the theory of spatial divisions of labor, we divide regional specialization into industrial specialization and functional specialization. Next, we calculate the index of industrial specialization and functional specialization based on the panel data from the year of 1995 to 2013 in 30 provinces of China to analyze the overall trend and spatial difference. Finally, this paper further establishes static panel data model and spatial Durbin model and makes conclusions:To begin with, during the sample period, industrial specialization and functional specialization both show a steadily rising trend which means China is in the stage of coexistence of two kinds of specialization, but their focuses are different. The promoting of industrial specialization relies mainly on the scale of financial development, while the promoting of functional specialization relies mainly on the efficiency and depth of financial development. But when we divide the sample into three subsamples by region, the influences vary obviously in different regions. The scale of financial development has the most significant role in promoting the level of industrial specialization in the Midwest area, while the efficiency and depth of financial development have the most significant role in promoting the level of functional specialization in the eastern area. However, considering the spatial distance between regions, functional specialization shows insignificant spatial dependence, but industrial specialization shows significant spatial dependence, hence we apply spatial Durbin model to study spatial spillover effects and the conclusions are basically consistent with the result of static panel:The efficiency and depth of financial development haven't shown a positive role in intra-regional spillover effect and inter-regional spillover effect; therefore, to improve the intra-regional spillover effect of the scale of financial development is the main way to promote the level of industrial specialization. Finally, we suggest some financial policies in order to facilitate the proper level of regional specialization.