Externalities, Transport Networks and the Economic Growth of Urban Clusters

Abstract

This article uses network analysis tools and new economic geography theory to modify the neo-classical model of regional economic growth, establishes an economic growth model of urban clusters based on externalities and transport networks through a differentiation of transaction costs, and uses the 1990-2008 data of some Chinese cities and the VAR model to test the model. Our empirical study shows that under the influence of transport networks, central cities rely on factor agglomeration for growth, while peripheral cities catch up quickly; that improved transport networks expedite the factor agglomeration of central cities; and that when some newly-added factors are reserved, increasing the node clustering coefficient and reducing peripheral cities’ transport costs will promote these cities’ application of externalities, expedite their economic growth, and facilitate the coordinated growth of central and peripheral cities. Therefore, in building the transport infrastructure, equal emphasis should be placed on linking central cities with peripheral ones and on linking peripheral cities with each other.