Economic Growth Mechanism of County-to-District Conversion and Its Dialectical Relationship with City Shrinkage: Case Study of County-to-District Conversion in Hangzhou, China

Abstract

In China, county-to-district conversion (CTDC) is a major form of administrative division adjustment (ADA) and an important element of national regime policy. In this study, the authors used the synthetic control method to analyze the economic growth effect and mechanism of the CTDC that occurred in Xiaoshan and Yuhang in 2001, and to explore the dialectical relationship between CTDC and city shrinkage. The research results are as follows. First, the economic growth following CTDC in Xiaoshan and Yuhang exhibited different patterns of variation. Economic growth in Xiaoshan increased progressively from 2002 to 2012, and the difference in annual growth of per capita GDP between the actual Xiaoshan and synthetic Xiaoshan reached 5.77%. However, the economic effect of CTDC had a time lag in Yuhang, with the growth curves of actual Yuhang and synthetic Yuhang largely coinciding in 2002–2006. Since 2007, the difference of annual growth rate was 2.2%. Second, the reduced shielding effect of administrative boundaries is the key to greater economic growth after CTDC. Thus, CTDC stimulates economic growth indirectly via urban integration planning, amplification of consumption and urban investment, and retention of financial and administrative power. Third, for Hangzhou, a city with strong development, CTDC will not cause economic recession. However, it is not suitable to add municipal districts to shrinking cities by CTDC, because it has the risk of aggravating the unbalanced urban development. Fourth, the study provides evidence for evaluating policy effects of CTDC and explains China's city shrinkage and urbanization from the perspective of ADA.