The Imbalanced Development Of China’s Regional Economy: Institutions Analysis

The study is based on the following three backgrounds: First, non-balanceddevelopment of the regional economy is an important performance and characteristicsof the development of the world economy today; Second, since China’s reform andopening up policy, along with the rapid and sustained economic expansion, theunbalance of regional economic development in China intensified, and becomes animportant issue that affects the economic development and social stability; Third, themainstream economics can not explain the non-balanced development of the regionaleconomy when it confronted with the real economy. Based on this reality andtheoretical background, the paper studies how institutions impact on the non-balanceddevelopment of the regional economy.Regional economic development theory mainly involves two aspects: First, theregional economic growth in the long-term trajectory, the second is the convergenceor divergence relationship between the macro-economic growth in the regions. Theexisting theories explain that external demand factors,capital, labor and technologyadvancement, human capital, the government behaviors, spatial clustering, innovationfactors are the long-term economic growth momentum. These factors only partiallyexplain the non-balanced development of China’s regional economic phenomenon.Schumpeter’s innovation theory believes that innovation is the essence of economicdevelopment, economic growth can be achieved if unbalanced state is caused byinnovation. Economic growth must provide a good investment and productionenvironment for invention and innovation. For backward areas, only innovation andinstitutional environment for innovation can promote their economic development.The theoretical progress paves the way for the institutional factors being taken intothe analysis of mainstream economics framework, and also provides importanttheoretical foundation for the implementation of the regional economic synergeticdevelopment policy.Institutional factors impact on the unbalanced development of the regionaleconomy are mainly reflected in two aspects: on the one hand, the efficiency of thesystem is able to improve the allocative efficiency of the factors of production in theregion; On the other hand, if the system in a region is of production and function,thenit can attract production outside the region to this area. Center-edge model, working capital model and current entrepreneurs model elaborated the combined effect ofincreasing returns to scale is a key factor in the unbalanced development of theregional economy, the regional labor, capital and entrepreneur flow depends on theincentives of system. A region with a high efficiency system will have higher laborproductivity and higher income levels, and are also able to create a safe,investment-motivated environment and atmosphere, leading the expected rate ofcapital return higher to improve entrepreneurs determined profit space, rise openopportunities and the social conducive production atmosphere, this attracts outsidearea labor, capital and entrepreneurs. Therefore, the high efficiency of the system is adecisive factor to promote economic concentration so as to promote the unbalanceddevelopment of regional economic.To technically process by using the Theil coefficient, the overall regionaldisparities can be decomposed into eastern internal gap, central internal gap, westerninternal gap, and the gap between the Three different regions, and evaluated from theeconomic system. The result shows that Since China’s reform, the overall differencesof regional economic development have experienced a course of first decreasing, andthen increasing trend. The contribution rate of the overall differences within regionshas showed a decreasing trend, while that of the inter-regional differences shows agrowing tendency, which displays a Club Convergence. During the period fromReform to the end of1980s, the internal gaps in the eastern part of China became themain sources of regional disparities among the whole country, with a gradual increasein inter-regional differences, and subsequently the inter-regional differences form thedominant factor of the overall differences. All conditions and environment that relatedto regional economic development may affect the non-balanced development ofregional economics. The formation and expansion of regional disparities may beproduced either by geographical environment, resource endowments, or economic andsocial development. Since China’s reform, the variations of regional economicdevelopment differences, the characteristics of transitional economies, and togetherwith the internal logic of reform are in consistency with each other. The unbalance ofinstitutional change in time and space has a decisive influence on the non-balanceddevelopment of regional economy. Therefore, institutional factors play a key role inthe unbalanced development of the regional economy.By selecting the four indicators like non-nationalization level, the proportion ofthe market allocation of economic resources, the opening rate and extent of theintroduction of foreign capital as system variables, the establishment of regional per capita GDP measurement model is set up to explain the differences in the level ofregional economic development. Empirical study shows that institution variables suchas reform and economic development are closely related to each other, and anefficient system, such as the market economy system, promote faster economicgrowth than the planned economic system.Therefore, economically backward regionsneed to acquire long-term economic growth by the way of introducing and imitatingthe advanced technology, together the introduction and imitation of formal system, orit will result in the failure of technology imitation.Based on this, the institutionalchange of an economically backward area is a change that is created and operated bythe developed regions and suitable for the development of backward regions.Thereare two ways to realize the institutional imitation changes in economically backwardregions, one is derivative institutional imitation of change and the other is forcedsystem mimic change. Because of the big differences in the primary economicstructure in different regions, the contrast of main force is different, and the path ofachieving institutional change to promote the economic development in the backwardregions is different either.