The Impact Of Industrial Agglomeration Benefits On Economic Growth

Since the reform and opening,industrial agglomeration has frequently occurred in China.In the eastern coastal areas,industrial agglomeration is obvious.These industrial agglomeration phenomena have made great contributions to regional economic development.With the strategy of "the Belt and Road",China has gradually entered a new condition of comprehensive opening to the outside world,and the focus of regional opening strategy shifts to the West.This will promote the development of industry and economy in Midwest regions.Therefore,the study of the relationship between industrial agglomeration and economic fluctuation plays an important role in the strategy of regional coordinative development.Most of the existing literatures are based on dynamic panel,spatial panel regression model or threshold regression model,which mainly demonstrates the existence of the relationship between industrial agglomeration and economic variables.However there are few literatures that analyze the impact of industrial agglomeration through indirect perspectives such as knowledge spillover effect.Therefore,this paper intends to demonstrate the relationship between industrial agglomeration and economic variables through indirect perspectives,such as knowledge spillover,technological innovation and transaction costs.Firstly,through the study of six theories,such as external economic theory,new economic geography theory and industrial location agglomeration theory,it is concluded that industrial agglomeration can bring four economic benefits:knowledge spillover effect,perfect labor market,favorable factors of market,and reduction of recurrent expenditure.Combining with the concept of transaction cost,three economic benefits are obtained,which are knowledge spillover,reduction of product market transaction cost and reduction of labor market transaction cost.The main features of this DSGE model are to add the benefit of TFP enhancement brought by knowledge spillover to intermediate product manufacturers,and add the benefit of reducing transaction costs into intermediate product manufacturers and final product manufacturers,and add the benefit of reducing labor market transaction costs to final product manufacturers.Secondly,the parameters of the model are assigned,and the applicability of the model was checked.In parameter estimation,some parameters are assigned by Bayesian estimation.Then,the impulse response and the indefinite variance decomposition are used to analyze the impact of the three industrial agglomeration benefit shocks on the fluctuation of economic variables.It is found that all three kinds of impact can promote economic variables,but the effect of TFP impact is greater than two kinds of transaction costs impact.Among the variable contribution rates of various economic variables,the impact of total factor productivity has a greater contribution.The two kinds of transaction cost shocks have a greater contribution to the change of labor supply.Finally,the mechanism of action between industrial agglomeration and economic development is based on the study of impulse response and the results of indefinite variance.The phenomenon of industrial agglomeration can reduce the production cost and improve the production efficiency of enterprises through three economic benefits,and then change the production path of maximizing profits.In order to gain more profits,enterprises will increase the demand of capital and labor.The increasing demand of capital and labor will promote the specialization and maturation of factor market.The improvements of factor production efficiency and mature factor market have increased factor prices.Finally,household consumption budget has been improved,consumption in the economy has increased,and economic development has been promoted.