Social Sciences in China (Chinese Edition)

No.2, 2014

 

An Analysis of the Restructuring of Industry Distribution in China from the Perspective of Welfare Economics

(Abstract)

 

Wu Fuxiang and Cai Yue

 

At present, the spatial distribution of industry in China faces a predicament: industries in the east are too highly concentrated, while industrial structures in the central and western regions are close to collapse. From the perspective of differentiated interregional labor mobility, we have constructed a quadratic effect quasi-linear preference utility function and carried out model mapping and numerical simulation with a view to identifying the causes of this spatial imbalance along the two dimensions of individual and regional welfare. We find that over the long term, the spatial distribution of industry provides a certain threshold limit to the combination ratio of differentiated labor. The problem of the spatial distribution of Chinese industry derives from the fact that optimal market concentration deviates from optimal social concentration, because the eastern region does not function as an intermediary between the global and the domestic value chain. To resolve this predicament, we should act urgently to change our welfare compensation method from single transfer payments to welfare payments that also take industrial balance into consideration.