The Agglomeration Interaction Between Production Service Industry And Manufacturing Industry

Production service industry and manufacturing industry are the major impetus tothe economic growth of Yangtze River Delta. However Chinese manufacturing industrygets into the dilemma such as excess capacity, transformation and upgrading, and itseconomic growth is prone to the risk of decline than expected. In this circumstance,Yangtze River Delta as the cluster region of manufacturing industry can hardly beimmune against it. For western developed countries, their service industries are inclinedto be agglomerated and servitized when their manufacturing industries are agglomeratedto some degree. When it comes to our Yangtze River Delta, this paper studies theagglomeration degree between production service industry and manufacturing industry;the interaction situation and interaction method; the rational way to make use of mutualdependence and mutual correlation for actualizing the benign interaction betweenproduction service industry agglomeration and manufacturing industry agglomeration;and push forward the development of regional economy by tapping the agglomerationinteraction for coping with the industrial transformation and upgrading of economicstructure.This paper adopts Krugman concentration index to measure the agglomerationdegree between production service industry and manufacturing industry of30membercities in Yangtze River Delta from2003to2011, fits the agglomeration degree to showhow the agglomeration degree changes and interacts with the time, and measures thecorrelation coefficient. By doing so, this paper finds that the overall agglomerationdegree of production service industry is basically converged with the overallagglomeration degree of manufacturing industry in Yangtze River Delta, but most citieshave small degree of fitting and low correlation coefficient, which indicates thatproduction service industry and manufacturing industry can interact more between citiesrather than in either city.The theory part focuses on the forming process of production service industryagglomeration and manufacturing industry agglomeration, and analyzes the root causeof forming such interaction based on this theory. Then the internal mechanism of the interaction is expounded from the perspective of value chain and industry chain, and thetwo-way positive feedback effect of the agglomeration and interaction betweenproduction service industry and manufacturing industry is specially analyzed. In the end,the agglomeration and interaction effect between production service industry andmanufacturing industry can be decomposed into demand effect and cost effect. Basedon the interaction principle of demand effect and cost effect of production serviceagglomeration and manufacturing industry agglomeration, the empirical model is usedto build the interaction model, and panel data of30cities in Yangtze River Delta from2003to2011are selected to do empirical test on the interactive relation and influentialfactor. The findings show that manufacturing industry agglomeration can increase theoutput of production service industry, and the increase of relevant agglomeration degreeof production service industry in Yangtze River Delta can significantly improve theavailability of production service industry for the manufacturing industry of each city,which can reduce the production cost of manufacturing industry in each city. Theexpansion of city size and the reduction of transaction cost or other conditions canenhance the mutual interaction.Through the theoretical and empirical analysis, this paper proposes the followingpolicies:1. Strengthen the effective interaction mechanism between production serviceindustry agglomeration and manufacturing industry agglomeration. Encourage theservice outsourcing of manufacturing industry, stimulate the demand of manufacturingindustry for production service industry and the dependence of production serviceindustry for manufacturing industry, and reinforce the interaction effect ofagglomeration;2. Rationally plan and map the industrial location, optimize theindustrial structure and guide two industries on the route of coordinated development;3.Improve the transportation capacity. Besides increasing the investment on transportationconstruction, pay special attention to the quality of transportation constructed andrational layout of transportation;4. Properly enlarge the city size. It is recommended toinclude the surrounding counties into the city and the industrial planning system for thebenefit of rational planning;5. Specify the rational route of industrial development. Inthe entire economic circle of Yangtze River Delta, different routes of industrialdevelopment should be tailored for big and middle or small cities according to variousdevelopment requirements, due to the big difference of development degree. This paper has the following innovative points:1. Research angle. To date, most studiesabout the correlation between production service industry and manufacturing industryare concentrated on the one-way correlation, while there is only a few of studies on theagglomeration and interaction;2, Research object. The data source is city, which isdifferent from the data source of province chosen by many scholars;3. Empirical model.From the angle of value chain, this paper set the output of production service industryand the production cost of manufacturing industry as explained variables, and set theagglomeration degree as explanatory variable, thereby revealing the interaction betweenupstream and downstream industries via this model.