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The Role of Public Infrastructure in C hina's Regional Inequality and Growth: A Simultaneous Equations Approach
Author(s) -
Zheng Dan,
Kuroda Tatsuaki
Publication year - 2013
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12003
Subject(s) - economies of agglomeration , equity (law) , public infrastructure , china , economics , inequality , economic geography , economic inequality , distribution (mathematics) , business , economic growth , geography , mathematics , political science , mathematical analysis , archaeology , law
Using a simultaneous equations approach, this paper empirically investigates the impact of two types of public infrastructure, transportation infrastructure and knowledge infrastructure, on industrial geography, regional income disparities, and growth across 286 cities in C hina. It is found that an improvement in transportation infrastructure that reduces trade costs on goods increases growth and decreases income gap at the expense of increasing industrial agglomeration between cities. Therefore, this paper confirms the existence of a trade‐off between spatial equity (more even spatial distribution of economic activities) and spatial efficiency (higher growth rate). However, for knowledge infrastructure that reduces trade costs on ideas, it is found that it increases growth but also decreases income gap and industrial agglomeration simultaneously. Moreover, the impact of knowledge infrastructure is found to be larger in the case of high labor mobility.