The Role of Public Infrastructure in China's Regional Inequality and Growth: A Simultaneous Equations Approach

Abstract

Using a simultaneous equations approach, this paper empirically investigates the impact of two types of public infrastructure, transportation infrastructure and knowledge infrastructure, on industrial geography, regional income disparities, and growth across 286 cities in China. It is found that an improvement in transportation infrastructure that reduces trade costs on goods increases growth and decreases income gap at the expense of increasing industrial agglomeration between cities. Therefore, this paper confirms the existence of a trade-off between spatial equity (more even spatial distribution of economic activities) and spatial efficiency (higher growth rate). However, for knowledge infrastructure that reduces trade costs on ideas, it is found that it increases growth but also decreases income gap and industrial agglomeration simultaneously. Moreover, the impact of knowledge infrastructure is found to be larger in the case of high labor mobility.

How Does Infrastructure Affect Economic Growth? Insights From a Semiparametric Smooth Coefficient Approach and the Case of Telecommunications in China

“…This implies a case of mobile services supplementing fixed‐line rollout, for which Wavermen, Meschi, and Fuss () suggest combining landline and mobile subscription as a reasonable proxy for telecoms stocks . Such an indicator is employed in many existing studies (e.g., Dutta ; Fedderke and Bogetić ; Shiu and Lam ; Zhang and Kuroda ). In this paper the data on the combined telecoms indicator are obtained from China Statistical Yearbook and China Labour Statistical Yearbook .…”

“…Examining this infrastructure in China offers some empirical advantages. Unlike other infrastructure sectors in the country, investments in telecoms systems were nearly nonexistent before 1979, making China poorly endowed in terms of telecoms networks in the early 1980s (Zhang and Kuroda ). It is not until the early 1990s that the sector started receiving increasing investment, whose distribution was, however, uneven and favorable of coastal regions (which have been enjoying faster economic growth) versus interior provinces (which are less developed).…”

Spatial Structure Evolution of Urban Agglomerations and Its Driving Factors in Mainland China: From the Monocentric to the Polycentric Dimension

“…INF represents the transport infrastructure. The transportation facilities affect transportation costs and then change the spatial form of the city by influencing the centripetal and centrifugal forces of economic agglomeration [56,57]. We express transport infrastructure as the per capita road mileage to reflect the level of transportation infrastructure construction in the UAs.…”

China’s special economic zones: an analysis of policy to reduce regional disparities

“…The Chinese government made a goal to eradicate completely the regional inequalities being experienced by the west by the turn of the century. This promise failed to materialize, but the inequalities were reduced by investing in additional infrastructure, creating economic partnerships between the coast and the west, and increasing the west's ability to attract FDI (Sun, 2013;Zheng & Kuroda, 2013). The Chinese government sought to address the economic inequalities being experienced by the west to prevent social instability and improve the standard of living for the vast majority of the country's poor.…”