The Research On The Influence Of Industrial Agglomeration Incurred By Race To The Bottom Behaviors

This paper argued that the phenomenon of race to the bottom in the process of industrial development of China is an important reason for industrial agglomeration.Though the research on the behavior patterns of local governments,the common method for local governments to getting for investment is taking race to the bottom behaviors for increasing local comparative advantages,to attract industrial capital and enterprises settled.However,excessive use of race to the bottom behaviors may cause a negative impact on the economic development in the future.Based on the thinking to whether local governments could really promote industrial agglomeration in this method,and whether this method is sustainable,we made detailed theoretical analysis and empirical research focused on the relationship between industrial agglomeration and race to the bottom behaviors by local governments.According to the induction and summary to race to the bottom behaviors of local governments,we concluded the common race to the bottom behaviors into three kinds,which are race to the bottom on environment,land and tax.These three kinds of race to the bottom behaviors are aimed at lowering local entry threshold,reducing the cost and tax burden of enterprises to achieve the purpose of attracting industrial capital.And then we analyzed the reasons why race to the bottom behaviors were widely used in China through the research of local government behavior incentive.Due to the reform of tax-sharing system,the revenue of local governments was reduced,together with the promotion tournament system of official evaluation,local officials had strong incentive to stimulate local industrial development through race to the bottom behaviors.Furthermore,we made a simple model to simulate the race to the bottom competition between local governments by game theory,and found that race to the bottom behavior is more likely to occur in the regions with lower level of economic development.Also,in the regions with similar level of economic development may happen a vicious race to the bottom phenomenon.Therefore it was necessary to guide and restrain race to the bottom behaviors of local governments.In the empirical part,we used the panel data of 31 provinces to analyze the relationship between industrial agglomeration and race to the bottom behaviors from 2003 to 2005.The empirical results showed that there were significant nonlinear relationship between three types of race to the bottom behaviors and industrial agglomeration.Among the results,the relationship between race to the bottom on environment and industrial agglomeration is inverted U curve,and as same of race to the bottom on tax,while the race to the bottom on land is U curve with industrial agglomeration.Based on the theoretical research and empirical results,we concluded some policy recommendations to improve the phenomenon of race to the bottom between local governments,promote the coordinated development of regional development and sustainable development of Chinese economy.