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Economic Opening and Industrial agglomeration in China

  • Zhao Chen

    (China Center for Economic Studies, Fudan University,)

  • Yu Jin

    (China Center for Economic Studies, Fudan University,)

  • Ming Lu

    (Dep. of Economics, Employment & Social Security Research Center, & China Center for Economic Studies, Fudan University,)

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This paper explores the causes of industrial agglomeration in China using the provincial panel data during 1987-2001, focusing on the effects of economic opening. The determinants of industrial agglomeration are tested by controlling three types of factors, those of economic policies, economic geography and new economic geography, respectively. In summary, we find: (1) Economic opening, which is also related with geography and history encourages industrial agglomeration; (2) Large market size, effects of forward and backward linkage, high level of urbanization, better infrastructure and less involvement of local government tend to facilitate industrial concentration; (3) Costal regions have geographical advantage in attracting firms. These findings not only support the new economic geography theory from evidence within China, but also emphasize the important role that policies like economic opening might directly play in industrial agglomeration. The most important policy implication of this paper is that by quickening up the step of integrating into world economy and deregulating, even those less developed regions might accelerate industrial agglomeration and thus decrease regional disparity.

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Paper provided by EconWPA in its series Industrial Organization with number 0511012.

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Length: 24 pages
Date of creation: 16 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0511012
Note: Type of Document - pdf; pages: 24
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