3. Industrial Agglomeration: A Simulation Model

Concerning the distribution of population between the home country and rest of the world, here this book assumes that the share of skilled and unskilled workers is in line with the reality of China’s distribution. According to statistics provided by the World Bank (http://​data.​worldbank.​org/​), the rural and urban populations of China account for 22.4 and 17.52 percent respectively of the world’s rural and urban population on averaged between 2001 and 2010. Accordingly, here this book assumes that the share of skilled and unskilled workers in the home country both occupy around one-fifth of the world’s population in our simulation.

According to the Chinese provincial statistical yearbook, the share of agricultural workers (unskilled workers) in the inland provinces is higher than that in coastal provinces by about 22.3 percent on average from 2001 to 2010. If we consider the phenomenon of larger rural migrant workers from hinterland to urbanized coastal provinces in China, the share of unskilled workers is greater in the hinterland compared to the coastal regions by close to 20 percent. Therefore, the total share of unskilled workers in China is \( {{\left( {1 - \mu } \right)} \mathord{\left/ {\vphantom {{\left( {1 - \mu } \right)} 5}} \right. \kern-0pt} 5} \). The share of unskilled workers in hinterland and gate regions can be noted as \( {{\left( {1 - \mu } \right)} \mathord{\left/ {\vphantom {{\left( {1 - \mu } \right)} {10}}} \right. \kern-0pt} {10}}{ + }\delta \) and \( {{\left( {1 - \mu } \right)} \mathord{\left/ {\vphantom {{\left( {1 - \mu } \right)} {10}}} \right. \kern-0pt} {10}} - \delta \) respectively. \( 2\delta \) represents the difference of unskilled workers between the hinterland and the gate regions. Because in our simulation \( \mu \) is assumed to be 0.4, then the total share of unskilled workers in China \( {{\left( {1 - \mu } \right)} \mathord{\left/ {\vphantom {{\left( {1 - \mu } \right)} 5}} \right. \kern-0pt} 5} \) takes the value of 0.12. This means that more shares of 20 percent of unskilled workers in the hinterland equals 0.024. We can then say that \( 2\delta \,{ = }\,0.024\left( {\delta \,{ = }\,0.012} \right) \) can reflect the reality of asymmetry in terms of regional size between the hinterland and gate regions in China.

In Fig. 3.2, we should note that for the different value of \( t \) the corresponding thresholds of break and sustain points (\( T_{B} \) and \( T_{S} \)) are also different. In other words, these thresholds are the function of \( t \). For the whole interval of \( t > 1.65 \), Fig. 3.2 just illustrates the general relationship between the share of manufacturing firms in the gate region and the trade costs. This note can also apply to Fig. 3.3.

Similar to Fig. 3.2, we should note that in Fig. 3.4 for the different value of \( T \), the thresholds (\( t_{B} \) and \( t_{S} \)) could vary with the values of \( T \). That is to say these thresholds are the functions of \( T \). Figure 3.4 just illustrates the general relationship between the share of manufacturing firms in the gate region and the domestic transport costs. This note can also apply to Fig. 3.5.