Institutional Differences: An Interpretation Of What The Gap

The differential between West and East in China has existed for a long period and still keeps changing constantly. There are great divergences on the reasons and trend of the change of Regional Economy Inequality, Some researchers argue that the regional economic differential has been narrowing or keeps steady while some believe that it has kept growing since Chinese Reform and Open-Door Policy has been carried out.In this paper, the author illustrates that the regional differential keeps growing by comparative study on gross economic output, per capita GDP, growth rate, household income and level of urbanization between West and East in China. Then he argues that the continuing growth of West-East differential will have kinds of unhealthy effect on the economic and politic life of China, which will hinder the process of the modernization and keeps the national economy from sustainable and healthy developing.There are different opinions on the reason of the change of regional differential, a common one is that the difference is the result of multiple effects from nature, economy and politic and so on. This paper tries to show that the regional differential is the result of the arrangement of institution by using Institution Economics and Institutional Analysis. The key point to narrow or eliminate the differential is to carry on institution change and speed up social and economic development in the west of China, narrowing or eliminating regional differential step by step.The article has five chapters:Chapter one, Theoretical Structure: Economy Development and Institution Change. As the need of study, this chapter logically states some conception of and opinions on Institution and Institution Change of New Institution Economics, such as the connotation and function of institution, the change of institution, the relationship between Institution Change and economy development. All of them provide a theoretical conception and methodological basis for the following analysis in thispaper.Chapter two, West-East Differential: a Problem that Deserves carefully Thinking about. This part discusses the continuing growing economy differential between west and east in China in total output, growing rate, per capita GDP, household income and urbanization level. The statement gives a positive basis for the following analysis. The author also discusses some of the native effects of growing West-East differential.Chapter three, Institution Differential: the Root of West-East Differential. In this chapter, the author gives the opinions of different researches on the reason of west-east differential: it is the result of the effects of many factors and then points out that the main difference between west and east area is Institution Difference though there are many factors such as location, capital, technology and talent.Chapter four, Case Analysis: Hangzhou and Xian. By comparatively analyzing several main economic indexes of the two historical cities, the author argues that the factors, which cause differential between the two cities, are both natural and unnatural, but the effect of those unnatural factors, especially the effect of institution differential is greater than that of those natural factors. Institution is a main factor in economy growth.Chapter five, Institution Innovation: a Systematical Program of Narrowing West-East Differential. On the basis of the theoretical discuss and positive analysis of previous chapters and referring to the experience of other countries, the author makes out a Institution Innovation Program for narrowing or eliminating West-East differential, there are both formal institution innovation and informal institution innovation, including in details: building a common, opening and ordering market; developing of non-national economy; ordering the fiscal transfer payment system; deepening public administration reform and promoting the change of informal institution arrangement in the west of China.