LOCATION AND ECONOMIC GROWTH:CASE STUDY IN CHINA

Key words: 
• location /
• economic growth /
• advantage

Abstract: This paper explores how location could affect economic growth and it has always been omitted in economic analysis. Geographic factors can affect economic activities. Three mechanisms of location affecting economic growth have been studied: consumption, production and migration. The initial superior location will take such advantages as lower transport costs and lower price level, so it could have higher consumption utility, higher productivity, and attract more human capital, then lead higher growth. Those regions with the superior location will have higher utility due to more product varities and the comparative lower price, and higher wage due to the production technology, and it would attract more individuals with higher human capital to move to this location. It is a kind of agglomeration, meaning the superior location will hold more advantages and higher growth rate, otherwise those locations with poor geographic factor will be even worse. Based on Chinese provincial economic growth experiences of these years, this paper does some empirical analysis by regressing on some variables including the geographic ones. In this paper, the dummy variables and population density are used to measure the location factor. And we find evidences supporting the view that dominant locations such as coastal areas grow faster, on the contrary, middle and western provinces grow slower. Location does affect economic growth.