1. Center for Forecasting Science, CAS Specialization and its changes in Chinese Provinces: Does the international integration still matter? (PRELIMINARY WORK) Xuemei JIANG Center for Forecasting Science, Chinese Academy of Sicences

2. Center for Forecasting Science, CAS Outline  Background  Motivation  Method  Results

3. Center for Forecasting Science, CAS Background

4. Center for Forecasting Science, CAS Background Volume Area Under Land Survey(10 000 hectares) Total Populations (100 000 persons) Proportion of Urban Population Gross Regional Product(in billion RMB) Total Trade Volumes (USD 10 million) Foreign Direct Investment (100 million USD) Coastal1081551776651633719932417369 Inland84254781580311225180483258 Sum950691299214682756221737320627 Share Coastal11.4%39.9%45.3%59.3%91.7%84.2% Inland88.6%60.1%54.7%40.7%8.3%15.8% Main Indicators of Coastal and Inland Regions in China, 2007

5. Center for Forecasting Science, CAS Background  GRP Shares of Coastal and Inland Regions, 1980-2011

6. Center for Forecasting Science, CAS Background  Manufacture Shares of Coastal and Inland Regions, 1980-2011

7. Center for Forecasting Science, CAS Motivation of Paper  Empirically analyze the dynamics of production activity locations  What factor leads to the de-concentration since 2003?

8. Center for Forecasting Science, CAS Literature Review  Concentration since 1990s Batisse and Poncet (2004), Economic Geography Ma (2006), The World Economy De Sousa and Poncet (2007), Regional Science and Urban Economics Amiti and Javorsik (2008), Journal of Development economics Hering and Poncet (2009, 2010) China Economic Review & The Review of Economics and Statistics  Highlights the role of economic geography Factors: international integration

9. Center for Forecasting Science, CAS Literature Review  Summary of the factors:  International Integration Biased Opening-up Policy, FDI Flow & Exports  Factor Endowments High- Skilled Labor & Capital  Market Potential Increased return to scale  Access to Suppliers  Local Protectionism

10. Center for Forecasting Science, CAS Literature Review  De-concentration since 2003  Descriptive Analysis: Wu and Li, 2010; Zhao, 2011  Congestion Cost Higher land and labor cost in coastal regions due to concentrations

11. Center for Forecasting Science, CAS Motivation of Paper  Empirically analyze the dynamics of production activity locations  What factor leads to the de-concentration since 2003?  Does the international integration still matter?  Database:  Regional input-output tables, 1997-2007  Sectoral level Access to suppliers  Supplementary database: labor

12. Center for Forecasting Science, CAS Descriptive Analysis  Location quotient: region k and industry i  Regional Specialization: region k  Industrial Concentration: industry i

13. Center for Forecasting Science, CAS Regional Specialization, 1997-2007 Coastal 199720022007 Central 199720022007 West 199720022007 BJ 1.231.201.18 AH 0.890.940.97 CQ 0.960.870.91 FJ 1.011.071.04 HB 0.920.950.97 GS 1.060.92 GD 1.091.05 HN 0.951.031.11 GX 0.900.860.85 JS 0.960.94 HLJ 1.121.111.02 GZ 0.820.840.99 LN 1.041.020.95 HB 0.940.961.00 IM 0.930.971.02 SD 1.021.00 HN 1.000.951.02 NX 0.971.000.95 SH 1.071.000.95 JL 0.970.870.92 SsX 0.990.961.00 TJ 1.080.980.92 JX 0.990.940.97 SC 0.900.960.92 ZJ 0.961.05 SX 1.131.231.06 YN 0.850.810.84 Mean 1.0521.0351.010 Mean 0.9920.9981.003 Mean 0.9310.9190.933

14. Center for Forecasting Science, CAS Industrial Concentration, 1997-2007

15. Center for Forecasting Science, CAS Industrial Concentration, 1997-2007 (cont.) 199720022007 21Electricity, gas and water production and supply1.101.071.21 22Construction1.051.191.27 23Transport and storage, post and telecommunication1.111.101.12 24Wholesale and retail trade, catering trade1.031.041.07 25Finance and insurance1.041.000.96 26Real estate0.911.000.98 27Social services1.000.960.94 28Health services, sports and social welfare1.051.161.19 29Education, culture and arts, radio, film and television1.080.951.09 30Scientific research and general technical services1.201.071.09 31Public administration and other sectors1.131.121.26

16. Center for Forecasting Science, CAS Method: Empirical Model  Dependent variable:  share of output in industry i and region k  Independent variable  Market potential: Harris’s concept Market Potential i,k =

17. Center for Forecasting Science, CAS Method: Empirical Model  Factor Endowments: Batisse and Poncent (2004)  Labor intensity i,k =  Capital intensity i,k =  Natural resources intensity i,k =

18. Center for Forecasting Science, CAS Method: Empirical Model  Supply Access: Zhao (2011)  Supply access i,k =  Wage: Hering and Poncet (2009, 2010)  Wage cost i,k =

19. Center for Forecasting Science, CAS Method: Empirical Model  International integration  Dummy for coastal regions  Lagged independent variable  share of output in industry i and region k in previous period (2007 vs.2002)

20. Center for Forecasting Science, CAS Results with *, ** and *** denoting the significance at 1, 5 and 10% level. 02&0720022007inlandcoastal Fixed effects cap.004.009* -0.005*.017***-0.044 lab.185*.105* 0.252*.077* 0.420* resource-.001.001-0.013.006 -0.003** supply access.004*-.090* 0.035*-.177* 0.031** market potential.246*.220* 0.299*.386* 0.106* wage cost.249*.199* 0.250*.211* 0.516** lag.524*.685* 0.394*.580* 0.440* Obs. No1674837 1240434 R2R2 0.800.83 0.86

21. Center for Forecasting Science, CAS Temporal Change  More important  Supply access, Wage cost, Labor intensity, Market potential  Less important  Share in last period, Capital intensity  Resource: Not significant

22. Center for Forecasting Science, CAS Coastal vs.Inland regions  More important  Supply access, Labor intensity, Wage cost  Less important  Capital intensity, Market potential, Share in last period  Resource  Only significant in coastal regions Role of international integration: Decreased!

23. Center for Forecasting Science, CAS Comments & Questions Email: jiangxuem@gmail.com