ESSAYS ON CHNA'S INDUSTRIALIZATION AND ECONOMIC GEOGRAPHY

Abstract

This thesis analyzes the resource misallocation in China’s industrialization from the spatial perspective. Chapter 1 examines the market failure in allocating resources across regions when multiple equilibria of regional manufacturing employment emerge during a country’s industrialization. The market failure results in a delay in the decentralization of the manufacturing employment from a core-peripheral equilibrium. Chapter 2 analyzes the spatial misallocation of capital and the consequent spatial labor misallocation across Chinese Prefecture-level cities. It reveals that capital subsidy makes big cities not large enough, while small and medium-sized cities over-occupy capital and labor. Removing subsidy will increase the country’s aggregate TFP. Chapter 3 investigates the incentive of local government in subsidizing inefficient firms. It shows that the extent of subsidy declined substantially from 1998 to 2007. In exploring the location heterogeneity, it unfolds both theoretically and empirically that cities with better technology-accessibility tend to have a smaller subsidy.