Optimize the Doing Business Environment to Promote Balanced Economic Development between North and South:Evolution from Limited Economic Access Order to Open Economic Access Order
The adage,"One tree,with spring winds,has two aspects,with the southern branches basking in warmth and the northern branches enduring cold,"has increasingly mirrored the economic divergence between northern and southern China since 2012.Prior to 2012,the economic growth rates of the northern and southern regions exhibited fluctuations but maintained a convergence,with the economic aggregate distribution at 54% for the south and 46% for the north.After 2012,the southern economic growth rate consistently surpassed that of the north.In 2016 and 2018,the disparity even widened to 5 to 10 percentage points.Throughout this period,the northern economic proportion in the national total continuously decreased from 46.4% to 41.3%.This study delves into the evolution of the doing business environment and its implications for the economic divergence between northern and southern China.It scrutinizes the historical transformation of the government-market relationship during China's industrial transition.Given the diverse initial conditions,the interactions between local governments and various types of enterprises in the north and south have given rise to distinct doing business environments.In the northern region,a partial government,inefficient enterprises,and restrictive entry institutions have contributed to a business environment characterized by a"limited economic access order."In contrast,the southern region exhibits a neutral government,more efficient enterprises,and open-entry institutions,culminating in a doing business environment characterized by an"open economic access order."The heterogeneous business environments in the north and south have distinct landscapes,with the proliferation of small enterprises in the south and the prevalence of large enterprises in the north.The study establishes a comprehensive database on the business environment for 272 Chinese cities from 2012 to 2019,shedding light on the disparities in the doing business environments between northern and southern China.To reveal the direct impact of the business environment on the economic divergence between these regions,the study employs a"pairwise comparison"strategy,developing indicators for"north-south economic disparity"and"north-south doing business environment disparity."These indicators are subsequently utilized in a direct regression analysis.The estimation results reveal that the doing business environment can elucidate the north-south economic disparity from 5.8%-14.2%.The primary mechanism through which the doing business environment influences the economic divergence between the north and south is by"reducing institutional costs and stimulating market dynamism and social creativity."The doing business environment in the south,characterized by an"open economic access order,"as opposed to the north's"limited economic access order,"is more conducive to establishing a low institutional cost advantage,increasing the number of enterprises,and fostering a high concentration of private and small businesses.Furthermore,the"open economic access order"in the doing business environment promotes competition,propels technological innovation,especially in integrating emerging digital technologies into the real economy,and advances the development of the digital economy,contributing to improvements in labor productivity.In examining the economic divergence and equilibrium between northern and southern regions,this study presents two principal contributions.First,departing from the perspectives of prior scholars who leaned on the neoclassical economic growth theory or macroeconomic frameworks,this study interprets the issue through the lens of the evolving business environment,delving into the institutional structures grounded in market entities.Second,in terms of empirical methodology,deviating from the approaches traditionally employed by scholars,such as economic gravity models,regional grouping regression methods,or quadratic assignment procedures,this study adopts a"pairwise comparison"strategy for indistinguishable north-south cities as the core method.The robustness of the findings is validated using the propensity score"precise matching"method.This approach effectively alleviates estimation biases arising from systematic differences between northern and southern cities.The study highlights the imperative of consistently optimizing regional doing business environments to attain balanced economic development between the northern and southern regions,fostering high-quality regional progress.This optimization entails transitioning the business environments from a"limited economic access order"to an"open economic access order."Policy endeavors should focus on three pivotal aspects-promoting neutral governance,revitalizing market entities,and nurturing competitive and open markets.
Doing Business EnvironmentBalanced Economic Development between North and SouthEnterprise AgglomerationHigh-quality Development