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Agglomeration and Spatial Spillover Effects of Regional Economic Growth in China

Feng Li () and Guangdong Li ()
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Feng Li: School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China
Guangdong Li: Key Laboratory of Regional Sustainable Development Modeling, Institute of Geographic Sciences and Natural Resources Research (IGSNRR), Chinese Academy of Sciences (CAS), 11A Datun Road, Chaoyang District, Beijing 100101, China

Sustainability, 2018, vol. 10, issue 12, 1-13

Abstract: As the processes of globalization and localization deepen, spatial externalities of economic growth are becoming increasingly apparent. The agglomeration mechanisms and spillover effects of China’s regional economic growth are also gradually gaining attention. Nevertheless, there is a continuing lack of research at the prefecture and county levels. As a result, building on the foundations of new economic geography and centered on the concept of market potential, this paper used spatial econometrics and panel data from Chinese counties to calculate inequality in the economic growth of counties at the prefecture level for the period 1992–2013. It also investigated the agglomeration versus economic inequality trade-off as well as quantitatively measuring spatial spillover effects at the county and prefecture level in China. The results showed that economic agglomeration, represented by market potential, had a significant influence on economic growth at the prefecture level in China. In addition, economic agglomeration exacerbated regional economic inequality, but economic inequality within a controllable range was found to have a positive influence on economic growth. Thus, there is a trade-off between economic growth and economic agglomeration. Economic growth at the prefecture level in China is not yet free of the effects of basic factors of production, and direct spillover effects, represented by market potential, have the most significant and strongest positive influence on economic growth. Moreover, it was found that the economic growth of prefectures was inseparable from the random impacts of surrounding prefectures and that it was also affected by indirect spatial spillover effects. On the whole, the rational use of the benefits of regional economic agglomeration and spillover effects, the gradual removal of market barriers, and the transformation of the development of prefecture-level economic growth will be the keys to prefecture-level economic development in the future.

Keywords: market potential; economic agglomeration; new economic geography; spatial spillover effects; county economy; prefecture-scale; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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