Using a Locating Potential Index for Estimating Road Construction Effects on Indsutries Location in China



Using a Locating Potential Index for Estimating Road Construction Effects on Indsutries Location in China

Authors

ZHEN Y Z and OSMAN 0, Nagoya University, Japan

Description

Improvement of road networks has both direct and indirect effects. Direct effects are explained as the increment of transport convenience and the reduction of transport time or cost. Indirect effects are those which occur as a consequence of infrastructur

Abstract

Improvement of road networks has both direct and indirect effects. Direct effects are explained as the increment of transport convenience and the reduction of transport time or cost. Indirect effects are those which occur as a consequence of infrastructure improvement in the field of production, employment, location change, tnigation movements and land value. These two kinds of effect mean that 1) road infrastructure improvement may have an effect on regional economy through reduction in tmsport time and costs, and such a reduction leads to expansion of the markets for products and materials. 2) enterprises will benefit from this increased accessibility, so that they will be induced to change their locations accordingly. 3) the relationship between land demand and supply will change to produce a new kind of land value. At present, the analysis of the effects in China is mainly limited to the direct one but neglects the indirect one.

We have developed a model for estimating the effects of expressway construction on foreign investment in China (Yang, et. al 1995). But because there are several policies introduced by government favourable to foreign investment such as the free use of land and exemption from business tax within the first three years, and because compared with the wages in developed countries, the wage difference between cities in China is not obviously enough to affect the production costs for foreign enterprises, in the model we considered mainly the transportation conveniencekost and potential market scale. as the location factors. Therefore the model cannot be applied to the analysis of the location behaviour of existing domestic industries. Thmfore in this study w6 attempt to develop a new model which can deal with the location behaviour of domestic industries.

In contrast to foreign investment, location behaviour of existing domestic enterprises is much more complicated. Obviously enterprises want to maximise their benefit when they choose a location. They may first consider production cost factors such as land price, labour cost and infrastructure cost and next accessibility to the materials and products market (such as transportation cost/time and convenience). However at present in China, domestic enterprises are strictly controlled by government and their activities need approval from government before implementation. The main decision power over such matters as location change, land price and other main production costs is held by governments. When considering the location of industries, government takes both enterprisesÕ and social benefit into account. Besides, government also wants to keep a rational industry location pattern and suitable city scale.

Therefore the principle of industry location in China is different from that in developed countries where the location pattern is a result of enterprises choice which can be affected by taxes and regulation policies. In China the government has more power and influence. For example, government decides not only the land price but also the scale of land market. Government also has the right to forbid labourers from entering the labour market as well as to decide wages for all industries. Sometimes it even uses administrative rather than economic methods to adjust the location pattern. Therefore the location theory which exists in developed countries cannot easily be applied in China. The aim of this study is to model the comprehensive results of this kind of behaviour and develop methods for analysing the changes in industrial location due to the improvement of road. Thus estimation of the effects of road construction will become possible.

Publisher

Association for European Transport