Economic Agglomeration Should Not Be Blamed for Widening Income Gaps in China*

Zhu Xiwei ( 朱希伟 )1 and Tao Yongliang ( 陶永亮 )
1 Center for Research of Private Economy, Zhejiang University, Hangzhou, China
2 School of Economics, Zhejiang University, Hangzhou, China

 
Abstract: Agglomeration of economic activities is a common phenomenon across the world. Theoretical and empirical studies have shown that agglomeration promotes dynamic efficiency, which in turn is conducive to the long-term prosperity of a country’s economy. Compared with most countries, the spatial concentration of various industries in China is very low, and Chinese cities are relatively small and equal-sized. Thus, it is unnecessary to contain the agglomeration of economic activities in China. Widening regional gaps since pro-market reforms and opening-up in China should be ascribed to institutional barriers rather than agglomeration. Therefore, China should refrain from containing agglomeration and instead focus on integrating product and factor markets and improving education and health care in less developed areas.
Key words: agglomeration, growth, New Economic Geography, regional disparities

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