Economic and institutional determinants of geographical concentration of industries in transition economies: Evidence from China
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This thesis investigates the determinants of geographical concentration of industries during the market-oriented reform period 1984-2005 in China, paying particular attention to both economic and institutional forces and their evolution over time. Province-level panel data and industry-level panel data are constructed for the analysis. We find evidence of increasing geographical concentration of industries and shifts of major manufacturing centers in the past thirty years. Our econometric analysis indicates that local market size, economies of scale and export-orientation are important determinants of the distribution of industries. We also find evidence for circular causality of demand linkage through local capital accumulation, which is consistent with New Economic Geography theory. As China is undergoing the transition from a central planned to market-oriented economy, institutional factors, such as regional protectionism and the dominance of state-owned enterprises in certain industries, are also found to affect the distribution of industries. We find that these institutional factors had offsetting effects against the economic forces in influencing the distribution of industries in the early stages of economic reforms. However, in more recent periods, as economic reforms deepen institutional factors become less important and economic forces become the dominant determinants of the distribution of industries in China.