The equilibrium location of industrial manufacturing and laborers working in the pan-Pearl River Delta of China

Abstract

Thousands of manufacturing firms clustering in China's coastal regions show signs of relocation in inland provinces because of the disadvantages of location condition and laborer's quality of life (QOL) since the opening policy. Also the signs will induce redistribution of export freight flow of seaports. This paper intends to explore the interaction relationship between firm's relocation and laborer's workplace choices from a micro-decision level. First, based on the discrete choice theory, the choice behavior models of manufacturing firms and laborers are built. Second, taken the wages as bond, the interactive equilibrium model of firm's relocation and laborer's workplace choice is built. Finally, the “communication equipment, computers, and related electronic equipment manufacturing” in pan-Pearl River Delta (PRD) region of China is taken as an example. Under equilibrium situation, in parallel with the backflow of outside laborers, the manufacturing firms will relocate in inland provinces either with fluent laborers or nearby coastal developed provinces, and the export cargo of seaports in PRD region will be largely attracted to other seaports. The results are verified with the practical activities of Foxconn in China.

Keywords:

• Industrial (re)location
• Quality of life
• Random utility
• Pearl River Delta region

Acknowledgement

This work was supported by National Natural Science Foundation of China (71431001, 51108053, 51078049, and 51208079), the Trans-Century Training Program Foundation for Talents from the Ministry of Education of China and Liaoning Excellent Talents in University (LJQ2012045), the Key Projects of Philosophy and Social Sciences from the Department of Education (11JZD049), the Fundamental Research Funds for the Central Universities (3132013079), the Humanities and Social Sciences Foundation from the Ministry of Education of China (09YJA790021).