Asian Perspective Seminar: Xuebo Wang

Title: The political-economy origins of economic geography

Abstract: Prevailing theories of economic geography attribute the spatial concentration of economic activity primarily to market forces such as agglomeration spillovers. This paper develops a political-economy framework in which political power acts as an independent centripetal force: whereas markets draw activity toward productive locations, political power draws resources toward administrative centers that control their allocation. The two mechanisms produce similar core–periphery patterns but imply fundamentally different spatial consequences. Market-driven agglomeration reflects efficient responses to economic fundamentals and can generate positive regional spillovers; administratively driven concentration, by contrast, distorts spatial allocation through political siphoning, creating an administrative premium that appears as economic discontinuities across administrative boundaries. We test this framework using China’s provincial capitals, where economic and political authority are jointly concentrated within a hierarchical administrative system. Applying a boundary-discontinuity design to high-resolution 1 × 1 km gridded GDP data, we use economic discontinuities at provincial-capital borders as an empirical measure of politically induced spatial concentration. Using province-level panel data, we show that higher marketization levels are associated with significantly smaller boundary discontinuities, suggesting that market allocation constrains the distortions generated by political concentration. Larger discontinuities are associated with greater within-province factor misallocation, slower long-run growth, and wider spatial inequality. These findings identify political authority as a fundamental but overlooked determinant of economic geography and demonstrate that the consequences of spatial concentration depend critically on whether concentration arises from market forces or political allocation.