Specialization and its changes in Chinese Provinces: Does the international integration still matter? (PRELIMINARY WORK)

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Specialization and its changes in Chinese
Provinces Does the international integration
still matter?(PRELIMINARY WORK)
Xuemei JIANG Center for Forecasting Science,
Chinese Academy of Sicences
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Outline

• Background
• Motivation
• Method
• Results

3
Background
4
Background
Main Indicators of Coastal and Inland Regions in
China, 2007
Volume Area Under Land Survey(10 000 hectares) Total Populations (100 000 persons) Proportion of Urban Population Gross Regional Product(in billion RMB) Total Trade Volumes (USD 10 million) Foreign Direct Investment (100 million USD)
Coastal 10815 5177 665 16337 199324 17369
Inland 84254 7815 803 11225 18048 3258
Sum 95069 12992 1468 27562 217373 20627
Share
Coastal 11.4 39.9 45.3 59.3 91.7 84.2
Inland 88.6 60.1 54.7 40.7 8.3 15.8
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Background

• GRP Shares of Coastal and Inland Regions,
  1980-2011

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Background

• Manufacture Shares of Coastal and Inland Regions,
  1980-2011

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Motivation of Paper

• Empirically analyze the dynamics of production
  activity locations
• What factor leads to the de-concentration since
  2003?

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Literature Review

• Concentration since 1990s
• Batisse and Poncet (2004), Economic Geography
• Ma (2006), The World Economy
• De Sousa and Poncet (2007), Regional Science and
  Urban Economics
• Amiti and Javorsik (2008), Journal of Development
  economics
• Hering and Poncet (2009, 2010) China Economic
  Review The Review of Economics and Statistics
• Highlights the role of economic geography
• Factors international integration

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Literature Review

• Summary of the factors
• International Integration
• Biased Opening-up Policy, FDI Flow Exports
• Factor Endowments
• High- Skilled Labor Capital
• Market Potential
• Increased return to scale
• Access to Suppliers
• Local Protectionism

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Literature Review

• De-concentration since 2003
• Descriptive Analysis Wu and Li, 2010 Zhao, 2011
• Congestion Cost
• Higher land and labor cost in coastal regions due
  to concentrations

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Motivation of Paper

• Empirically analyze the dynamics of production
  activity locations
• What factor leads to the de-concentration since
  2003?
• Does the international integration still matter?
• Database
• Regional input-output tables, 1997-2007
• Sectoral level
• Access to suppliers
• Supplementary database labor

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Descriptive Analysis

• Location quotient region k and industry i
• Regional Specialization region k
• Industrial Concentration industry i

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Regional Specialization, 1997-2007
Coastal 1997 2002 2007 Central 1997 2002 2007 West 1997 2002 2007
BJ 1.23 1.20 1.18 AH 0.89 0.94 0.97 CQ 0.96 0.87 0.91
FJ 1.01 1.07 1.04 HB 0.92 0.95 0.97 GS 1.06 0.92 0.92
GD 1.09 1.05 1.05 HN 0.95 1.03 1.11 GX 0.90 0.86 0.85
JS 0.96 0.94 0.94 HLJ 1.12 1.11 1.02 GZ 0.82 0.84 0.99
LN 1.04 1.02 0.95 HB 0.94 0.96 1.00 IM 0.93 0.97 1.02
SD 1.02 1.00 1.00 HN 1.00 0.95 1.02 NX 0.97 1.00 0.95
SH 1.07 1.00 0.95 JL 0.97 0.87 0.92 SsX 0.99 0.96 1.00
TJ 1.08 0.98 0.92 JX 0.99 0.94 0.97 SC 0.90 0.96 0.92
ZJ 0.96 1.05 1.05 SX 1.13 1.23 1.06 YN 0.85 0.81 0.84
Mean 1.052 1.035 1.010 Mean 0.992 0.998 1.003 Mean 0.931 0.919 0.933
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Industrial Concentration, 1997-2007
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Industrial Concentration, 1997-2007 (cont.)
1997 2002 2007
21 Electricity, gas and water production and supply 1.10 1.07 1.21
22 Construction 1.05 1.19 1.27
23 Transport and storage, post and telecommunication 1.11 1.10 1.12
24 Wholesale and retail trade, catering trade 1.03 1.04 1.07
25 Finance and insurance 1.04 1.00 0.96
26 Real estate 0.91 1.00 0.98
27 Social services 1.00 0.96 0.94
28 Health services, sports and social welfare 1.05 1.16 1.19
29 Education, culture and arts, radio, film and television 1.08 0.95 1.09
30 Scientific research and general technical services 1.20 1.07 1.09
31 Public administration and other sectors 1.13 1.12 1.26
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Method Empirical Model

• Dependent variable
• share of output in industry i and region k
• Independent variable
• Market potential Harriss concept
• Market Potential i,k

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Method Empirical Model

• Factor Endowments Batisse and Poncent (2004)
• Labor intensityi,k
• Capital intensityi,k
• Natural resources intensityi,k

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Method Empirical Model

• Supply Access Zhao (2011)
• Supply accessi,k
• Wage Hering and Poncet (2009, 2010)
• Wage costi,k

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Method Empirical Model

• International integration
• Dummy for coastal regions
• Lagged independent variable
• share of output in industry i and region k in
  previous period (2007 vs.2002)

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Results
0207 2002 2007 inland coastal
Fixed effects Fixed effects Fixed effects Fixed effects
cap .004 .009 -0.005 .017 -0.044
lab .185 .105 0.252 .077 0.420
resource -.001 .001 -0.013 .006 -0.003
supply access .004 -.090 0.035 -.177 0.031
market potential .246 .220 0.299 .386 0.106
wage cost .249 .199 0.250 .211 0.516
lag .524 .685 0.394 .580 0.440
Obs. No 1674 837 837 1240 434
R2 0.80 0.83 0.83 0.86 0.86
with , and denoting the significance at
1, 5 and 10 level.
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Temporal Change

• More important
• Supply access, Wage cost, Labor intensity,
  Market potential
• Less important
• Share in last period, Capital intensity
• Resource Not significant

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Coastal vs.Inland regions

• More important
• Supply access, Labor intensity, Wage cost
• Less important
• Capital intensity, Market potential, Share in
  last period
• Resource
• Only significant in coastal regions
• Role of international integration Decreased!

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Comments Questions
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