The Home Market Effect And Regional Economic Development-Comparison Between China And European Union

For a long time, the comparative advantage of China’s western region is interpreted as the resources endowment advantage and low labor costs, but a large number of empirical facts have shown that the unsustainability of resources and low labor costs. Spatial economics theory suggests that the home market effect on industry market size is a source of new comparative advantage. And if some industries show the home market effect, will become the new driving force for economic development. Test whether there is the home market effect in a certain industry department, therefore, which provides a theoretical basis for governments to judge that industrial location is dependent on the factor endowment of a region or local demand. For the masses of the areas in China, pay attention to the inside of the region in other areas of the market demand and domestic demand, and gradually cultivate related industries of the home market effect, and perhaps it is the realistic choice of economic development.This paper calculated the home market effect of China and the EU countries. Results show that there is home market effect in provinces of China, and there is no home market effect in the countries of European Union, except Portuguesa. China is a populous country and the market demand is larger than the EU countries, which is in line with the facts. China should pay attention to industrial development model characterized by home market effect to promote economic development. From the level of sectors, the industries of the home market effect in European Union countries are more than Chinese. From the level of sectors of EU countries, it verifies that there is the home effect in10sectors of12sectors. Form the level of sectors of China, it verifies that there is the home market in7sectors of12sectors. The industries of the home market effect in Chinese are more concentrated in technology and capital-intensive industry, while the industries of the home effect in EU countries are opposite. It explains that the EU’s industrial structure is better than Chinese in a particular industry, and China can learn from the EU’s industry policy. This paper also demonsts that the relations between the home market effect and economic development, proving that the home market effect has a positive role in promoting economic development. And in this two relations, China is more obvious than the EU. This provide policy implications for our provincial transformation of the mode of industrial development and improve the quality and efficiency of industry development, such as through plant breeding the industries of the home market effect to transform the traditional industry characterized by resource-intensive or labor-intensive industry development mode, by exploring and using scale effect in the development of industry to speed up the pace of industrial development. In this way, it can optimize the industrial structure, promote industrial development, accelerate economic development.