Ways to Enhance the Fortunes of Lagging Cities and Regions

下面为大家整理一篇优秀的essay代写范文- Ways to Enhance the Fortunes of Lagging Cities and Regions，供大家参考学习，这篇论文讨论了区域经济发展不平衡。基于累积因果关系的理论、增长极理论、集群理论以及创新的理论，很容易发现，区域经济发展不平衡，不是因为自然资源，但也取决于经济发展不平衡的情况。然而，过大的经济差距往往会导致严重的社会问题，制约发达地区和欠发达地区的发展。因此，有必要通过提供适当的制度安排和技术进步来增加落后地区的财富。

Introduction

In the context of globalization, spatial concentration and spatial dispersal in economic activities as well as the unbalanced growth have become the important presentation and characteristics of current economic development all over the world. In 2006, Thomas L. Friedman argued that, “the world is flat”. His opinion reflects the process of spatial dispersal, economic specialization and regional economic integration in the waves of globalization. However, the process does not appear expected conditional convergence, and the polarization of regional economic development is particularly apparent, which manifest as economic agglomeration, diversification and regional unbalanced development.

The unbalanced development of regional economy is a complex social economic phenomenon, and it is also a universal problem during the process of economic development in various countries. Because of the differences in natural resources and the distribution of social resources, the regional differences of economic development are objective. However, the existence of great regional disparity tends to lead to social problems and negatively influence social harmony. In this way, it is necessary to figure out ways to enhance the fortunes of lagging cities and regions. In this paper, it firstly introduces the reasons of unbalanced regional growth, and then it demonstrates the necessity of achieving balanced regional development. What is more, with the help of theoretical basis and case studies, the paper provides useful suggestions for lagging cities and regions. Finally, it draws out some more general conclusions.

Reasons of Unbalanced Regional Growth

In Economic Theory and Underdeveloped Regions, Gunnar Myrdal (1957) puts forwards the theory of geographic dualism, and uses the concept of spread effect and backwash effect to demonstrate the advantages and disadvantages of priority development of developed areas to underdeveloped areas. According to Myrdal (1957), economic growth cannot be achieved in different spaces at the same time. Because of self advantages or being influenced by certain external factors, certain regions could develop preferentially. The rapid development of certain region will lead to the gap between the region and other regions in economic development, wage level and profit. The factors profit in developed regions is higher than lagging regions, and the factors for development tend to flow to developed regions on account of market mechanism. Myrdal calls the phenomenon as backwash effect. The circular and cumulative causation of backwash effect results to the further rapid development of developed regions and slower development of lagging regions. Regional economic gap is increasingly outstanding and forms dual economic structure.

In Economic Space: Theory and Applications and Concept of Growth Pole, Fransois Perroux argues that, “growth does not appear everywhere and all at once, it appears in points or development poles, with variable intensities, it spreads along diverse channels and with varying terminal effects to the whole of the economy” (Hassan, 2004). In other words, economic growth firstly appears in the growth poles in which capital and technology concentrate and scale economies effect forms. On the one hand, the growth poles tend to be able to master economic units through commodity supply and demand s well as the inter mobility of factors of product. On the other hand, the development of growth poles serves as role model for the economic development of surrounding regions, consequently, growth poles play important role in impacting economic development of surrounding regions. In addition, due to the attraction of growth poles, the talents, resources, capital and other economic factors are attracted to enter growth poles and form economies of scale.

Furthermore, according to Michael Porter’s cluster theory, in a specific area, a large number of enterprises and related supporting organizations with close relations in industry gather together in space and form powerful and continuous competitive advantage (Porter, 1998). The importance of industry clusters on regional economic development comes from its special competitive advantage. Industry clusters not only are professional, but also have the characteristic of geographical clustering, and they tend to represent the core competence of regions. In The Wealth of Nations, Adam Smith (1776) demonstrates the thought of division of labor and market scale. Smith-Young theorem underlines the interaction between division of labor and market.

In addition, based on Schumpeter’s theory of innovation, innovation is the essence of economic development (McCraw, 2007). Schumpeter applies theory of innovation to the process of economic development, and points out that the whole economic development is achieved through the circular flow of innovation, imitation and equilibrium of creative enterprises or regions. Generally, Schumpeter argues that, it is the unbalanced state led by innovation that promote the achievement of economic growth (McCraw, 2007). For the sake of economic growth, it is necessary to provide good investment and production environment to invention and innovation.

In general, all these theories explain the reasons of unbalanced regional growth, and stress that economic development depends on unbalance; but these theories ignore the positive effect of balanced development.

Necessity of Achieving Balanced Regional Development

Moderate regional economic gap could enhance the initiative and sense of urgency for the development of various regions. However, once the gap is too wide, the Matthew Effect will appear. Underdeveloped regions will lose the ability of self-development, and the talents, capital, resources and other factors of product will flow to developed regions. Local develop condition in underdeveloped countries remain undeveloped and their development potential is restricted, which seriously impact their whole economic development. At the same time, economic overexpansion in developed regions goes beyond the limit of resources and environment, and various natural social problems such as environmental pollution, unreasonable land use, and the decline of the quality of life. In addition, the situation that underdeveloped regions cannot achieve development will make developed regions lack of support in market and supply of resources and primary commodity. In this way, the further development of developed regions is restricted by the undeveloped regions. What is more, moderate regional economic gap promotes population mobility and information transfer, and promote the change of social structure among regions and the fusion and convergence of development. Nevertheless, too wide gap is easy to result to emotional estrangement and tendency of separation. What is worse, too wide gap poses a threat to social stability (OECD, 2012).

Ways to Achieve the Development of Lagging Cities and Regions

In the first place, it is necessary to provide effective institutions for the development of lagging cities and regions.

According to institutional theory, all the production activities of human society and the behaviors of all economic subjects could be analyzed in the institutional framework, and the behaviors of microeconomic units, development of factors and economic growth are restricted to institutional development. In the context of different institutions, there are different development patterns and growth efficiency of economy in a state. Fundamentally, economic growth depends on institutional development (Acemoglu et al., 2005). During the process of modern economic development, economic growth relies on institutional development, and an effective property right system which provides appropriate individual stimulation is the decisive factor of promoting economic growth. Economy develops in the process of changing and improving institutions, and capital investment and technical progress are only the ways to achieve economic growth, the result of economic growth or itself (North, 1990). The views of new institutional economics provide rich source of ideas for people to understand the institutional change and regional unbalanced economic development. No matter the marginal output of capital, nor the improvement of production efficiency brought by technical progress, are all related to the incentive mechanism provided by institutions. In this way, institutional difference is the precondition of unbalanced development of regional economy. In other words, it is necessary to adjust the institutions in order to enhance the fortunes of lagging cities and regions.

On the one hand, institutions and institutional arrangement provide incentive mechanism. Incentive mechanism not only reflects the relation between individual goal and social goal, but also reflects the relation between the levels that an individual work hard and reward. The difference of institutional arrangement will lead to different incentive mechanisms. Effective incentive mechanism could integrate individual goal and social goal, the level that an individual work hard and his reword, and achieve the increase of individual welfare and social welfare. On the contrary, bad incentive mechanism tends to result to the disconnection between individual goal and social goal, or the individual efforts and his reward. Effective organization depends on the establishment of institutional facilities and clear property ownership. The effective institutional arrangement could promote individuals to strive for social activities and combine individual goal and social goal. Through researching the global ocean shipping from 1600 to 1750, North (1968) finds that, the transportation capability grew slowly at the time, but the productivity of ocean shipping was improved greatly at the same time. The reason was that the innovation of property right system changed shipping and market system, consequently, it effectively contained the impropriation behaviors of privates, maintained the safety of sea transportation, reduced the cost, and finally improved the productivity. Through analyzing the reasons of ocean shipping in Middle Ages and the rise of international trade, North and Thomas (1973) find that, clear definition of the property right is a key institutional factor of judging whether or not efficiency exists and finally promotes the economic growth. Since clear definition of property right not only stimulates individuals to strive for effective economic organizations, but also make individuals feel helpful that individual rate of return could be close to social rate of return. In addition, it also defines people’s relations during the transaction, improve productive activities through decreasing the uncertainty and transaction costs in transaction, and finally achieve potential return and possible institutional arrangement.

On the other hand, institutions and institutional arrangement could decrease transaction expense. Institutions define the revenue opportunity, transitional information and maintain expectation. In this way, they reduce people’s uncertainty and opportunistic behaviors led by bounded rationality and incomplete information, and achieve the effect of reducing transaction expense and risks as well as optimizing the transaction behaviors. Ronald Harry Coase’s theory in the existence of enterprise system demonstrates that enterprise system plays an important role in reducing transaction expense (Williamson, 2014). Transaction expense is not applied in direct production process, but the coordination between people’s transaction behaviors. In this way, the amount of transaction cost could reflect the efficiency of regional economic activities in the context of unchanged technology. In general, because of the lack of imperfect legal system, prevalence of opportunism and high transaction risk in lagging cities and regions, people lack motivation to seek more effective output because of the increase of transaction expense. In the meantime, the institutions in advanced regions are relatively sound, and safe transaction tends to decrease the transaction expense virtually. Consequently, institutions could provide effective ways to save transaction expense.

In addition, institutions also positively impact the efficiency of other factors of product. Through defining and protecting property right, and the institutions make individual return be close to social return and better rewards due to harder work, labors could be promoted to release their potential. What is more, financial system decides the investment level of a region through influencing the availability of capital. The smooth flow of loan capital from the creditor to lender is achieved on the basis of effective institution. In the capital market and funds capital of lagging regions, it is difficult for investors to obtain capitals used for investment. In extreme situations, due to the lack or restriction of institutions, the allocative efficiency of capital is very low. In Nurturing Novelty, Kevin Morgan (2017) demonstrates the role of regional innovation policy in promoting regional development. Through the case studies of the Basque Country and Wales, it shows that how regional governance and innovation polices play important role in local economic development.

In the second place, as technological progress is one of the most important motivation of economic long-term development, it is essential for lagging regions to use independent innovation or technology diffusion to catch up with developed regions. Since Adam Smith discussed division and technology, a large number of economists have diligently strived after the relationship between technological change and economic growth. It is until the middle of the 20th century. Solow (1956) firstly treated technological progress as a model in promoting economic growth for a long time. In the late of 1980s, the endogenous growth theory especially for Schumpete’s endogenous growth theory truly regard technological progress as an internal factor promoting the economic growth. Various scholars research the relationship between technological progress and economic growth through the forms of technological progress, process of changing and direction of change. They generally accept that the differences of economic levels in different countries are mainly led by the differences in technological progress. A large number of scholars use theoretical model to prove that, underdeveloped countries could achieve rapid economic growth through technology import and technological progress. The research of Nelson et al. (1966) proves that, once the improvement of technological level in latecomers is proportional to the technological gap between latecomers and regions in forward position, the speed of technological progress in latecomers tend be faster than early-movers. Barro and Sara-I-Martin (1992) use the neoclassical growth model as a framework and exploit data on personal income since 1840 and on gross state product since 1963 to study convergence across the 48 contiguous U.S. sates. Based on their research result, they find that the initially poorer economy with a lower starting value tends to grow faster in per capita terms if two economies have the same parameters of technology and preferences. In other words, with the help of technology catch-up, various countries tend to achieve the convergence in earnings for a long time (Barro & Sala-I-Martin, 1995). In the context of open economy, Elkan (1996) establishes general equilibrium model of technology transfer, intimation and innovation. He supposes that all national capital stock could be improved effectively through technology transfer, intimation and innovation. His research proves that, underdeveloped regions could finally achieve technology catch-up and economic catch-up through technology import. The human capital accumulation, productivity, and rate of economic growth of countries at different starting values tend to be convergence. Once the technological progress in underdeveloped countries could be described through the concept of technology import, it could provide the advantage of backwardness called by Gerschenkron (1962). Nevertheless, the technological progress in underdeveloped countries is more complex than simple technology import or transferring the chief source or machines in developed countries, which is closely related to the silence and environmental sensitivity of technology (Evenson & Westphal, 2003). Most technologies include invisible technology and matched silent part are very sensitive to environment. It is necessary for enterprises to master certain absorptive capability, comprehensive ability to fully absorb and apply the technology and explore its values (Cohen & Levinthal, 1989). Even though certain capacities could be achieved automatedly as time goes on, in most cases, the accumulation of these capacities require positive technological efforts, including a well scheduled planned time, necessary human beings and the investment of material resources. On the basis of data of enterprises in Pakistan, Romijin (1997) explores the influence of the ability of technology absorption and learning. The research shows that, the technological effort of enterprises plays a significant part in constructing the technological capability. Through researching the economic development in Korea and technological learning of enterprises, the researcher concludes that education plays an important role in successful technology import (Fakir, 2008). What is more, Kim and Inkspen (2005) research the relationship among cooperating with foreigner research and development, absorption capacity and technology learning, and they find that, enterprise has a faster speed in technology learning if it introduces new technology faster, has more experience in cooperation and learns quickly. Generally, the cooperation with the research and development departments of foreigner enterprises has outstanding influence on technology learning, and the effect of technology learning can be promoted by the absorption capacity. Falvey, Foster and Greenaway (2006) use panel data to test the technology transfer between Southern and Northern countries, and they find that, technology transfer can be promoted effectively by absorption capability, and absorption capability is a key factor decides whether or not developing countries achieve the advantage of backwardness.

Conclusion

In conclusion, based on the theory of cumulative causation theory, theory of growth poles, cluster theory as well as the theory of innovation, it is easy to find that regional unbalanced economic development is not because of natural resources, but also due to the situation that economic development depends on unbalance. However, too wide economic gap tends to result to serious social problems and restrict the development both in developed regions and underdeveloped regions. In this way, it is necessary to enhance the fortune of lagging regions through providing appropriate institutional arrangement and technological progress. since institutions not only provide incentive mechanism, reduce transaction expense, but also positively impact the efficiency of other factors of product; meanwhile, technological progress is also proved to greatly promote regional economic growth.

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