Abstract

Recent studies have found that regional inequality is rising across the world, in both developed and developing countries.According to the World Bank（2000）, inequality across regions is growing in Brazil, Argentina, Colombia, Chile, and Mexico.Noorbakhsh（2003）and Haaparanta（1998）have shown that various measures of regional income inequality in India are diverging rather than converging.Hu（2002）finds that the income gap between Chinese coastal provinces and the hinterland has grown fast since the country opened its doors to foreign investment in the early 1980s.Kanbur and Zhang（2005）in an analysis of regional inequality over the last 50 years, find that the latest increase in regional inequality is due to trade openness.And the phenomenon is not unique to developing countries.Similar divergent patterns in the context of openness have been found in Italy, England, Spain, Australia, Russia and Europe as a whole.

There are arguments in favor of the reduction of these inequalities due to the social and political instability that can result from extreme inequality across regions within a country（Kanbur, Venables and Wan, 2005）.Moreover, regional disparities have been a topic on the political agenda of the European Union（EU）since the 1980s, when convergence across regions came to a halt. According to Lange（2004）, the EU utilizes a variety of policy instruments to promote regional convergence, such as cohesion funds channeled to lagging regions within countries.Puga（2002）has noted that these funds constitute the fastest growing component of the EU budget.Over the years, China has also taken many measures to address imbalances in regional economic development, such as the implementation of“western development”, “revitalizing the northeast old industrial base”and“rise of central China”strategy.

Since this latest increase in regional inequality has taken place during an era of increasing economic openness and international linkages, a number of re searchers have proposed a link between inequality and globalization.Yet this goes directly against what mainstream economic theorists have proposed: that increased economic openness actually serves to reduce spatial inequalities.Understanding this relationship is particularly important given the increasing prominence of regional inequality in policy debates around the world.And a greater understanding of the relationship between trade and regional inequality could make such policy instruments more effective, both in China, Europe and elsewhere.

Then trade liberalization is to reduce or exacerbate regional differences in economic development? Many scholars have done a lot of theoretical and empirical research on this theoretical proposition which full of practical significance, but they have come to conflicting conclusions.Based on the Dixit-Stiglitz model of monopolistic competition, with assumptions of increasing returns to scale and imperfect competition for the market structure, Krugman and Livas（1996）has established a new economic geography model, finding that in a closed economy, economic effects of backward and forward linkages arising from industry agglomeration become the main forces to further attract industry and factor. These centripetal forces in many developing countries lead to a“core—periphery”structure, exacerbated the regional income gap.When the economy is opened up, the role of the centrifugal force will become strong, and growing economic openness will fight to reduce the spatial imbalance.However, through the binding of agricultural population and land, and assuming that in the short term labor force is relatively non-mobile, Paluzie（2001）show that with the increase in manufacturing trade, regional income disparities will also gradually increase.

With the continuous deepening of reform and opening up in China, the relationship between trade liberalization and regional imbalance is worth studying, because it makes sense in implementing the scientific concept of development and narrowing the gap in regional development.what are the main influencing factors of China's regional economic development? How will trade openness affect these factors, and change the regional development through these factors? In the process of opening up, through what mechanism we can control the above-mentioned factors in order to reduce disparities between regions? For the restrictions of statistical information and the special complexity, current re search on the China's issue has not gone far enough.Utilizing a number of new statistical indicators, statistical methods and spatial panel model, and with the provincial panel data from 1978 to 2009, this book focus on the relationship between trade openness and regional development inequality, trying to find the mechanism and principle.

In addition to introduction, the book is divided into eight chapters.

Chapter one makes a general sort about the theories of relations between trade liberalization and economic growth, and regional economic development. The theory of relationship between trade and economic growth includes ideals about trade and economic growth under the framework of classical trade theory, neo-classical trade theory, new trade theory, new growth theory, and new economic geography.The trade and economic growth theory under the framework of new growth theory and new economic geography is the theoretical source of my research.

Chapter two takes into account the process of trade openness in China. First of all, I make a comprehensive review and summary of China's trade liberalization process and the outcome, and the preliminary study shows that foreign trade and economic growth are Granger causes each other.Then through a detailed comparative analysis on the measure of trade openness indicator, I select a proper indicator of trade openness to measure the trade openness of China, and use it to analyze the regional pattern China's trade openness, finding that China's trade liberalization has a notable feature of regional differentiation.

Chapter three is related to China's regional differences in economic development.At first, I systematically review China's regional economic development strategic plan and implementation since reform and opening up.Secondly, on the basis of a series of quantitative indicators of, I explore China's regional economic development gap and spatial correlation, and then study the relationship between regional trade liberalization differences and regional economic development gap, with the finding that differences in regional trade and opening up is an important reason for differences in regional economic development, and there is a significant feature of the spatial concentration.

Based on the existing literature, chapter four develops a set of hypotheses relating trade openness to regional inequality—the hypotheses that will be tested in the rest of the book.The first hypothesis is that poorer states will grow faster than rich ones as trade openness increases.The second is that states better endowed with infrastructure will grow faster than those with less infrastructure endowments as trade openness increases.Finally, the third hypothesis is that states with higher levels of human capital will tend to grow faster than those with lower levels of it as trade openness increases.The first hypothesis stems from the core-periphery model of Krugman and Livas Elizondo（1996）.The second and third hypotheses arise from comparing the predictions of the model of Krugman and Livas（1996）to the work of Myrdal（1971）on cumulative causation, specifically focusing on two factors: infrastructure and human capital.

In the fifth chapter, we construct a spatial panel econometric model based on the framework of the aforementioned theoretical models.With the spatiallag variable into it, the model is used for inspection of relations between trade openness and the spatial differences of regional economic development in China.This chapter will take advantage of the panel data of China's provincial-level regions as a whole level to make an ordinary panel empirical test and the spatiallag or error panel empirical test, as well as a comparative analysis.

Chapter six inspects the relations between trade openness and regional economic development in the industrial level.First of all, we investigate the changes in industrial structure, regional differences of industrial structure, as well as the impact of trade openness on the industrial structure evolution since China's reform and opening up.Then, using the comprehensive model of endogenous growth established in previous chapter, we build a spatial panel data regression equation based on the industry level, and make empirical test and analysis in the three industries.

Chapter seven analyzes the impact of trade openness on regional development difference of manufacturing sectors.Firstly, with consideration of the great variety of different manufacturing sectors, this chapter analyzes the space location and agglomeration in different industries.We study the local specialization in different provinces with Krugman Index, calculate the industry space Gini index and CR index and analyze the tendency and variation of agglomeration.After that, by applying the dynamic panel model built on endogenous growth theory, we investigate the regional growth disparity of manufacturing sectors in 1981—2006.We are mainly concerned about the roles that open-up and reform policies which are represented by trade openness and marketization respectively have played in imbalanced growth in China.

Summing-up the previous theoretical and empirical analysis, chapter eight accordingly gives the policy recommendations about adjustment of China's opening-up and regional economic development strategy.