Vertical Industrial Structure,Price Index Divergence and the Widening North-South Gap in China's Economy
Regional economic disparities have persisted as a longstanding issue in China's economic development,evolving to showcase a differentiated trend characterized by rapid growth in the South and a slowdown in the North.While the economic gap was traditionally delineated as an"East-West gap",concerted efforts through major development initiatives such as the"Western Development,""Northeast Revitalization,"and"Central China Rising"have gradually reduced this gap,fostering a trend of economic convergence.Despite this,data from 2010 onwards reveal an escalating economic polarization between the North and the South,with the economic share disparity widening substantially from 17.62％to 29.56％,an increase of 67.76％.In this context,our research explores the role and implications of the deviations between the Consumer Price Index(CPI)and the Producer Price Index(PPI)on this expanding economic gap,with a focus on the mechanisms which play in the vertical in-dustrial structure.Empirical results illustrate that price index divergence function as a mediating entity:areas with a higher concentration of upstream industries in their industrial framework exhibit greater price index deviations,which,in turn,tend to restrain regional economic growth.Utilizing a two-stage production DSGE model for simulation,we found that the vertical industrial structure,influenced by varying labor proportions in upstream and downstream production and the"backward pressure"dynamic of CPI on PPI,ex-acerbates the"crowding-in effect"on downstream labor.This arises from a heightened total labor cost,limiting the decrease in final product prices,and consequently engendering a more pronounced decline in the PPI compared to the CPI,thereby fa-cilitating price deviation.Our counterfactual analysis further substantiates that this vertical industrial structure amplifies the"crowding-in effect"of import factor prices on downstream labor,exacerbating the existing price deviation.This study elucidates that a vertical industrial structure could potentially amplify price deviations triggered by a down-turn in imported commodity prices.This tends to constrain the northern region's economy,which predominantly encompasses upstream industries,fostering a distinct economic divergence between the North and the South.The significant contribution of our research lies in illuminating the interconnected dynamics between vertical industrial structure,price index divergence,and regional economic disparities.By extending the prevalent analytical framework and addressing gaps in the existing litera-ture,our findings equip policymakers with a deeper understanding of the transmission routes of external shocks.This,we an-ticipate,would aid in the formulation and precise application of policies aimed at harmonizing regional development,steering it towards a path of coordinated and sustainable growth.
Vertical Industrial StructurePrice Index DivergenceTwo-Stage Production DSGE ModelThe North-South Gap
NETL
NSTL
万方数据
维普
