Labor Flow Costs,Urban Economic Agglomeration And Urban-Rural Income Gap

This paper mainly makes two studies.The first is to revise classic C-P model by introducing labor flow costs,and explore what will happen to economic equilibrium and how labor flow costs affect economic agglomeration.The second,concerning urban-rural income gap,is to investigate inherent relations between agglomeration and income gap.To finish the studies,the paper comprehensively uses a mathmetic model and empirical tests.Firstly,based on eight assumptions and general equilibrium analysis framework,the paper deduces an instaneous equilibrium,and then derives three propositions after using Mathematica9.0 to numerical simulation.Proposition I puts forward when labor flow costs are added to C-P model,possibility and degree of agglomeration will be reduced,and meanwhile a non-aggregated and non-asymmetric equilibrium may occur.Proposition II points out when transportation costs decreased gradually over time,a region's enhancement of agglomeration will lead to income gap between two regions decrease first,and then increase,roughly showing the U-shaped curve.Proposition III shows when labor flow cost parameters are not identical,which means biased policies are implemented,income gap between two regions will increase.Secondly,to verify rationality and applicability of three propositions,the paper conducts empirical tests sampling China's 246 cities at prefecture level or above from 2003 to 2015.Establishing a DPD model,using DIFF-GMM and SYS-GMM,conducting stationarity test,autoregression test,over identification test and robustness test,and contrasting results of POLS and FE,the paper proves the establishment of three propositions.Finally,the paper puts forward some policy implications toward narrowing the urban-rural income gap,including leading rural surplus labor force to transfer to small and middle-sized cities in the inland,maintaining appropriate degree of agglomeration,and coordinating development of urban and rural areas and so on.