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Reinterpreting China’s Regional Disparities from ‘New Economic Geography’ Perspective

Sun, Shuning LU (2011) EKHR23 20111
Department of Economic History
Abstract
The persistence of regional disparities at different spatial dimensions, especially the income gap among three major economic belts (i.e. East, Central, and West), is one of the most striking characters of economic development process in China since the reform and opening-up policy in the late 1970s. In recent years, the regional disparity in China is not only a matter of serious academic concern but also increases the level of political awareness. However, there is a lack of widely accepted consensus among a growing body of theoretical and empirical literature on the causes of regional disparities and on a list of effective policy instruments which may promote or ameliorate the divergence between different regions. Geographical... (More)
The persistence of regional disparities at different spatial dimensions, especially the income gap among three major economic belts (i.e. East, Central, and West), is one of the most striking characters of economic development process in China since the reform and opening-up policy in the late 1970s. In recent years, the regional disparity in China is not only a matter of serious academic concern but also increases the level of political awareness. However, there is a lack of widely accepted consensus among a growing body of theoretical and empirical literature on the causes of regional disparities and on a list of effective policy instruments which may promote or ameliorate the divergence between different regions. Geographical determinism and standard neoclassical regional economics are two important theories of regional development which provide different causal explanations for the evolution of regional disparities at different spatial scales. However, both theories have explicit weaknesses in identifying and explaining the major factors which have influenced and continue to influence the uneven distribution of economic activities and its resulting large disparities among countries and regions in many real-world cases.
Since the early 1990s, the growing “new economic geography” (NEG) literature, initiated by Krugman and synthesized by his co-writers including Fujita and Venables, has contributed a new analytical framework to interpret the emergence of economic concentration and regional disparities at variant spatial scales. The core building blocks of new economic geography models are product differentiation, increasing return to scale, across-sectional mobility of labor, and transport cost and the models are designed to show how economic agglomeration have emerged at different geographical scales from the interaction of important factors.
This paper borrows the main ideas from new economic geography to investigate China’s regional disparities between 1978 and 2009. The calculation of Theil index shows that the disparities between East, Central, and West have contributed the largest proportion of China’s total regional disparities during the post-reform period. In addition, the results of analysis show that the evolutionary process of China’s regional disparities is consistent with ‘core-periphery’ diagram. The paper argues that the important factors, such as policy intervention, geography, and new economic geography all have contributed to the changes of China’s regional disparities. Therefore, the introduction of economic policy should attempt to promote the process of market integration, facilitate the across-sectional movementof human and physical resources, and accelerate the gradual shift of traditional industries from coastal regions to inland areas. (Less)
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author
Sun, Shuning LU
supervisor
organization
course
EKHR23 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
China, regional disparities, geography, policy, new economic geography, industrial agglomeration, Theil index
language
English
id
2172316
date added to LUP
2011-10-20 13:34:48
date last changed
2011-10-20 13:34:48
@misc{2172316,
  abstract     = {The persistence of regional disparities at different spatial dimensions, especially the income gap among three major economic belts (i.e. East, Central, and West), is one of the most striking characters of economic development process in China since the reform and opening-up policy in the late 1970s. In recent years, the regional disparity in China is not only a matter of serious academic concern but also increases the level of political awareness. However, there is a lack of widely accepted consensus among a growing body of theoretical and empirical literature on the causes of regional disparities and on a list of effective policy instruments which may promote or ameliorate the divergence between different regions. Geographical determinism and standard neoclassical regional economics are two important theories of regional development which provide different causal explanations for the evolution of regional disparities at different spatial scales. However, both theories have explicit weaknesses in identifying and explaining the major factors which have influenced and continue to influence the uneven distribution of economic activities and its resulting large disparities among countries and regions in many real-world cases.
Since the early 1990s, the growing “new economic geography” (NEG) literature, initiated by Krugman and synthesized by his co-writers including Fujita and Venables, has contributed a new analytical framework to interpret the emergence of economic concentration and regional disparities at variant spatial scales. The core building blocks of new economic geography models are product differentiation, increasing return to scale, across-sectional mobility of labor, and transport cost and the models are designed to show how economic agglomeration have emerged at different geographical scales from the interaction of important factors.
This paper borrows the main ideas from new economic geography to investigate China’s regional disparities between 1978 and 2009. The calculation of Theil index shows that the disparities between East, Central, and West have contributed the largest proportion of China’s total regional disparities during the post-reform period. In addition, the results of analysis show that the evolutionary process of China’s regional disparities is consistent with ‘core-periphery’ diagram. The paper argues that the important factors, such as policy intervention, geography, and new economic geography all have contributed to the changes of China’s regional disparities. Therefore, the introduction of economic policy should attempt to promote the process of market integration, facilitate the across-sectional movementof human and physical resources, and accelerate the gradual shift of traditional industries from coastal regions to inland areas.},
  author       = {Sun, Shuning},
  keyword      = {China,regional disparities,geography,policy,new economic geography,industrial agglomeration,Theil index},
  language     = {eng},
  note         = {Student Paper},
  title        = {Reinterpreting China’s Regional Disparities from ‘New Economic Geography’ Perspective},
  year         = {2011},
}