Market Segmentation and Regional Productivity: Theoretical Mechanism and Empirical Evidence

Abstract

Based on the provincial panel data of China covering the period 1998-2016, this paper analyzes the impact and transmission mechanism of the commodity market segmentation and factor market segmentation on regional productivity by using the dynamic spatial panel model and mediating effect model. The results show that: Labor market segmentation is the strongest, followed by commodity market, and capital market segmentation is the weakest. The commodity market segmentation is inverted U-shaped relationship with regional productivity, namely the low intensity of commodity market segmentation is conducive to regional productivity, but in the long run, more than a certain intensity of it will have an obvious effect. Currently, the commodity market segmentation of most provinces in China is within the threshold value of improving regional productivity. However, factor market segmentation hinders regional productivity growth. Further influence mechanism test finds that different types of market segmentation have different transmission paths for regional productivity: In commodity market segmentation, market competition, demand scale and technology spillover are all important ways to affect regional productivity, and demand scale plays a leading role; factor market segmentation will affect regional productivity through resource allocation and enterprise decision-making behavior, among which the resource allocation effect plays a major role.