Market Integration,Firm Heterogeneity and Regional Investment Subsidy——A New Perspective Explaining the Regional Inequality in China
Market Integration,Firm Heterogeneity and Regional Investment Subsidy——A New Perspective Explaining the Regional Inequality in China
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发表时间:
2012
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通讯作者:
LV Da-guo
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作者:
LV Da-guo
The standard economic geography model is extended to allow for cost heterogeneity across firms in response to market integration,enabling us to study the effects of regional coordination policies that vary according to firm heterogeneity,which permits another kind of explanation mechanism to the regional inequality in China.Based on the model of Okubo et al.(2010),the paper introduces investment subsidies across regions,and shows that lower productivity firms are likely to relocate to the targeted regions provided investment subsidy.As a consequence the gap of regional development decreases but the gap of regional productivity increases,which is not beneficial to promote the sustainable development of underdeveloped areas.And in the long run,to promote the process of market integration continuously is the optimal regional policy as well as providing appropriate policies for less developed areas.