Study on the Mechanism of the Integration of Urban and Rural Development from the View of Elements Flow

Chang Ye,Jin Tianlin

(1.China Center for Industrial Security Research　Beijing Jiaotong University,Beijing　100044;2.School of Economics and Management　Northwest University,Xi’an　Shaanxi　710127)

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Study on the Mechanism of the Integration of Urban and Rural Development from the View of Elements Flow

Chang Ye1,Jin Tianlin2

(1.China Center for Industrial Security ResearchBeijing Jiaotong University,Beijing100044;2.School of Economics and ManagementNorthwest University,Xi’anShaanxi710127)

From the enterprise,individual and government,which are the three main economic behavior subject,this paper analysis factors impact of flow behavior main body and the change of the objective function,constraint function and the impact of the change of behavior equation,and then summarizes their effects on the integration of urban and rural development,to build from exogenous shocks to the endogenous to adapt to the economic decision-making framework,clarify elements flow affect the running mechanism of the urban-rural integration.

factors flow;integration of urban and rural development;mechanism study

Ⅰ.Factor flow,enterprise behavior and integration of urban and rural development

The process of factor flow from being restricted gradually to being free is a process continuing to improve the efficiency of enterprise factors allocation.The impact of changes in the enterprise budget constraint and objective functions on the enterprise behavior lies in that the incentive of the enterprise to obtain factors with lower cost and higher efficiency will be raised,the motive of the enterprise to pursue profits will be ignited,and the enterprise will be more reasonable to make choices among different factors so that the efficiency of the enterprise in factors allocation will be significantly improved.

As the reform is advanced from countries to cities and from agriculture to industry,the free factor flow has been expanded from regional deregulation to industry and property deregulation.Under the impact of the deregulation of the factor prices,the enterprise budget constraint continues to be tightened up and hardened while the profit objective needs to seek for the optimal factor combination of amount and price so that the enterprise will be more reasonable in its behaviors and will pursue the unity of risks and earnings more on the investment behaviors so as to enhance the competitiveness of the enterprise.

Changes of enterprise behavior in the process of factor flow transfer affect the enterprise behavior by changing the constraint function and objective function of the enterprise.So the two recognized mechanisms are respectively corresponding to the changing processes of the constraint function and objective function of the enterprise.The allocation effect and competition effect will inevitably result in the improvement of the enterprise efficiency which means the improvement of the entire micro-economic efficiency and will be helpful for the enhancement of the level of the urban and rural per capita income and the convergence of its advancement.Therefore,the improvement of the micro-enterprise efficiency will play a role in promoting the integration of the urban and rural development.

Ⅱ.Factor flow,government behavior and integration of the urban and rural development

1.Impact of factor flow deregulation on the government behavior constraint

Liberalization of factor flow is inseparable from the shift of the government work focus.The reform and opening-up policy started the process of shifting the government work focus.Such relation coupled with the work focus shifting process centering on economic construction has greatly stimulated the local government to develop the economy.Such impetus comes from not only the promotion incentives of local officers,but also from the maximized political and economic usufruct.On the other hand,the process of the government transferring from the planned economic system to the market economic system is a process continuing to clarify the boundaries of the government and the market;a process that the government is gradually changed from a major participant,a regulator,a guider of the market into a servicer and a guardian;and a process the government behavior constraint is constantly tightened up.From the liberalization of factor flow point of view,the government behavior constraint is a gradual process of convergence,meaning that the government,from discretionary control of factor flow,to acquiescence to the free factor flow,to the development of relevant laws and regulations for the factor flow,and to the respect of the decisive role of market mechanism in the process of the factor flow,shall minimize its disturbance to the factor flow step by step,and gradually tighten up the constraint on its behavior to a certain scope to show its important significance to the transformation of the government.In the process of the liberalization of the factor flow,the government,from abandoning the regional restriction at the beginning,to giving up the price restriction and later to withdrawing the property restriction,meaning that factor can achieve the free flow among the space,industrial departments and different forms of properties,has realized its own transformation,namely from a planned economic government of overall control type to a transformed economic government of comprehensive intervention economy to a market economic government comprehensively respect and maintain the market,while the continuous transformation is a process continuing to tighten up the government behavior constraint and a process to gradually clarify and define the boundary of the government behavior.It is significant to the government expecting to make a transformation to a market-type one.Therefore,the liberalization of the factor flow continues to tighten up the government behavior boundary in order to affect the government’s economic intervention behavior and accelerate the government’s transformation.

2.Impact of factor flow deregulation on government’s objective function

In the case that the government behavior boundary continues to be tightened up with the liberalization of the factor flow,the objective function of the government has been changed and adjusted accordingly.Under the planned economic system,the local government,as a part of the planned economy,has faithfully implemented the instructions from the central government and held fast to the various policies restricting the free factor flow,such as the people’s commune system and the urban labor wage control system which have prevented the free flow of the rural production factors,and the household registration system aiming at the prevention of the free flow of population and labor resource between the urban and rural and regions.At this time,without the autonomy,the objective function of the government is simply to complete the tasks consigned by the central government.

Inspired by the maximum political usufruct brought by the promotion incentives and fiscal decentralization,the administrative officers of the local governments will adjust the objective function to maximize the local economic aggregate within their tenures.Areas with different development levels will have absolutely opposite attitudes towards the factor flow.Government officers of less developed areas and less developed industries will be laden with anxiety because the liberalization of the factor flow is centralized from less developed areas to developed areas and from the less developed industries to advanced industries,while the outflow of the factors will be fatal for local economic development.As a result,the government officers of less developed areas tend to be object to the factor flow.Some areas may even carry out local protection and market segmentation to reduce the outflow of the factors and the competition with foreign products so that they can maximize the local economy within their tenures.However,in areas with developed economy,the factor flow will intensify the competition among factors to improve the efficiency of the factors.Due to the competition mechanism,enterprises are able to choose the most appropriate factor combination from the numerous and diversified factors to enhance their efficiency and promote the development of the local economy so that the cross-regional and local unified factor market can be formed to play a significant role in the urban agglomeration development.

When the reform is changing from the inventory growing policy focusing on the promotion of economic growth to the comprehensively sustainable scientific development policy emphasizing on economic growth,environmental protection,social development and regional coordination,the objective function of the government will be changed accordingly.Meanwhile,the factor flow has been changed from the initial unidirectional flow to developed areas and advanced industries to the bidirectional flow focusing more on considerations from multiple aspects.Thus,the government may,starting from the local factor endowment structure,choose appropriate industrial structure to support and develop according to the position of the local factor endowment in the region or the whole country so as to build an unhindered platform for the factor flow,expecting to obtain the foundation for the regional long-term development from the participation in the nationally unified division system.Therefore,the liberalization of the factor flow at this phase and the gradually established nationally unified market will promote the objective function of the government to be establishing platform for the rational factor flow,standardizing the factor flow and providing services for factor flow in order to gain the earnings brought with the factor flow.

3.Changes in government behavior and integration of the urban and rural development:two mechanisms and one result

Changes in government behavior are resulted from the effect of dual mechanisms step by step.To be specific,the two mechanisms are the transformation effect mechanism and the innovation effect mechanism of the government.The former one mainly shows an operating process that when the government is facing the impact of the factor flow on its own behavior boundary,it shall weight the target of the market-oriented reform and the goal of maximizing the economic aggregate within the tenure under its own incentive mechanism.However,these two targets can be coordinated only when the government can gradually adapt to the operating law of the market economic system through its constant transformation.Meanwhile,the transformation effect shall continue to clarify the relationship between the government and the market to define the government behavior boundary and restrain the offside behavior of the government while guarantee the government’s complement to the inadequacy of the market economy in order to constantly advance the development of the market economy and promote the economic development.Innovation effect mechanism describes another operating process that when the transformation of the government is basically completed,it will continue to be confronted with new problems and new situations.The government shall keep going to innovate in the system and the mechanism,straighten out the relationship between the market and the government based on the experience accumulated during the period of transformation in order to deepen the reform and release the system supply unceasingly to lay the foundation for solving the new problems.Due to the transformation effect and the innovation effect mechanisms,the government behavior will inevitably result in a result,that is,the continuous optimization of the government services,meaning that the quantity,scope,variety of the public products provide by the government will be constantly improved and advanced.The unequal urban and rural public services have ever been an important obstacle to the integration of the urban and rural development.But with the continuous optimization of the government’s public services,the urban and rural supplies of public articles are gradually tend to be equal,which has accelerated the progress of the integration of the urban and rural development.In the process of equalizing the urban and rural public services,the factor flow and distribution pay attention not only to the amount of the marginal income,but more to the differentiated characteristics of different areas in order to achieve the goal of per capita income convergence,laying the most important cornerstone for the integration of the urban and rural development.

Ⅲ.Conclusion and policy implications

The paper analyzes the impacts of the liberation of the factor flow on behaviors from three perspectives including individual,enterprise and government;focusing on the influences of the liberation of the factor flow on the constraint function and the objective function of the behavioral agents.It explores the specific process that how the liberalization of the factor flow affects the individual behavior and connects the changes in behavior of the behavioral agent with the integration of the urban and rural development to probe into the impact of the changes in behavior of the behavioral agent on the integration of the urban and rural development in order to construct a relatively complete framework about the operational mechanism of the liberalization of the factor flow to the integration of the urban and rural development.

It is noticeable about the practical significance of the discussion of the operational mechanism of the integration of the urban and rural development from the perspective of the factor flow.Here are three policy implications:First,break the institutional barrier of the factor flow.It requires the government to focus on the break of the institutional barriers resulting in the unequal development in different areas to remove the barriers setting among countries,cities,areas and industries by people to establish a fair system for factor flow and resource optimization and allocation during the administration process.Second,standardize the market order of the factor flow.It requires the government to further relax the control on enterprise establishment,investment,financing and other fields but develop a specific and clear negative list in order to deregulate the policies for the emergence of the market power in rural areas and lay the institutional foundation for the market development in rural areas.Third,cultivate the social environment for factor flow.It shall strive to improve the infrastructure network system between the urban and rural to provide efficient and convenient channels and platforms for the urban and rural economic and social interaction.It shall also accelerate the process of the local reform so that the government can improve the working efficiency of the local governments to create a service-type government which can generate an efficient environment for urban and rural personnel exchanges,commercial and trading circulation and information dissemination.

Notes:

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About the author：Chang Ye,postdoctoral,senior economist,senior human resources professional,China Industry Security Research Center,Beijing Jiaotong University;Jin Tianlin,PH.D.,School of Economics and Management,Northwest University.