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.
Highlights
Since the policy of reform and opening-up was first introduced in 1978, China’s economic development has been nothing short of extraordinary
The LM (Lagrange multiplier) test, the robust LM test, and the adjusted R2 and log-likelihood values, it was found that the spatial error model (SEM) spatial fixed model was the most suitable model because the LM spatial error and the robust LM spatial error were significantly greater than the LM spatial lag and the robust LM spatial lag, respectively
The spatial spillover effect between prefectures played an important role in the economic development of China
Summary
Since the policy of reform and opening-up was first introduced in 1978, China’s economic development has been nothing short of extraordinary. China’s experience of rapid economic development over the past 40 years has affirmed the validity of using regional spatial agglomerations to achieve economic growth. These agglomerations contribute to economic growth, regional disparities in economic development caused by them gradually become more apparent. At the beginning of the reform and opening-up policy, southeastern coastal areas of China were at the forefront of national economic development thanks to favorable State policies. This led to unbalanced regional development, but it led to spillovers that positively affected the development of surrounding areas. If capital is scarce, greater regional inequality will not produce economic efficiency, as the relationship between regional inequality and economic efficiency is not monotonic [5]
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