The Externality Of Urban Agglomeration, And Regional Wage Gap Research

In the early1990s, the famous economist Paul Krugman (1991) has inaugurated New Economic Geography (NEG) through introduction of the space factor that has long been ignored by economists into the mainstream economical field. NEG includes three fundamental models, namely regional model, city model and international model. Among them, the city model with Von Thiinen’s Isolated State (1826) as the starting point, has expounded the interaction mechanism of agglomeration economies and externalities and evolutionary process of the Urban Agglomeration. Because of NEG’s theoretical advantage in urban agglomeration and regional imbalance development, this theory has strong explanatory power of regional economic disparities in the current global background of urbanization.In the literature about Chinese regional differences, most of research are about the gap between urban and rural areas, district differences (such as the western, central and east), while there are few researches studying Chinese urban disparities. With China’s current economic development, and China’s urbanization and urban agglomeration degrees continuously improving, the city space structure with the city circle as the main form is taking shape. At the same time, the spatial differences between cities have gradually expanded. We believe that this gap will become a new problem in China’s regional economic development following the urban-rural gap and regional disparities.Under this background, this dissertation is dedicated to study the influence mechanisms of urban agglomeration and city wage gap from the perspective of externalities. This article chooses city wage as the regional differences index, because city wage is different from the existed indexes which are based on GDP, per capita GDP, and other macroeconomic indicators, meanwhile, I think solving the economic disparities between the cities finally rests with narrowing the wage gap of city residents.This article has demonstrated the microeconomic basis based on the interactive relationship between the externalities and urban agglomeration, and what’s more, on the basis of previous studies, such as Fujita, et al(1999), Ciccone (2000), the paper has made theoretical development forward, and conducted systematic theoretical research on urban agglomeration’s influence on city’s wage level from the pecuniary externalities and technology externalities respectively, which are two different influence mechanisms.Based on a set of panel data comprised of25prefectural-level and above cities (districts) from2000to2010in Yangtze River Delta city circle, this article has conducted empirical test for exploring the impact of urban agglomeration on the city wages. The results of the study show that:externalities have significant influences on urban agglomeration and they have the bidirectional effect relations; pecuniary externalities and technological externalities difference are the key reason for the increasing city wage gap; the urbanization and urban agglomeration degree is insufficient for the optimal level in China. Based on this, this article attempts to put forward a suitable urbanization way for China’s economically and socially harmonious development in the intention of improving the urban agglomeration level and control the city wage gap.The article consists of seven chapters. The first chapter is introduction, which introduces selected topic’s background, purpose and significance of the subject, the technical route, research methods and the innovation of the dissertation.The second chapter is literature review. Firstly, the basic concepts, connotation and research fields of urban agglomeration in existing literature are summarized. Secondly, reviewing the formation mechanism of urban agglomeration; Thirdly, tidying and expounding the relation between the urban agglomeration and the city wage gap in literature. At last, the conclusion to the current literature.The third chapter has made a full scan for urban agglomeration degree and city wage level of the city circle in Yangtze River Delta. This chapter has conducted longitudinal and transverse comparative analysis on urban agglomeration and wage index through25prefectural-level and above cities (districts) from2000to2010in Yangtze River Delta, and made descriptive statistics analysis by STATA12.0The fourth chapter has elaborated the formation mechanism of urban agglomeration and externalities. First of all, concluding the interactive relationship between the externalities and urban agglomeration on the basis of the existing literature; Secondly, expounding the main mechanism of action from three different perspective of the externalities respectively which are the pecuniary externalities, technological externalities and social cultural externalities; Finally, this chapter has made empirical research for analyzing the relationship between urban agglomeration and externalities and given some conclusions. The fifth and sixth chapter analyze urban agglomeration’s influence on city’s wage level from the pecuniary externalities and technology externalities respectively. Based on previous studies, such as Fujita, et al (1999), Ciccone (2000), this chapter has made theoretical development forward, and conducted systematic theoretical research and then made positive analysis by panel data of prefectural-level and above cities (districts) in Yangtze River Delta. The results showed that externalities differences are the main reason for the city wage gap.The seven chapter consists of the major conclusion, policy advice and the future research direction.