Spatial inequality in productivity, closely related to the spatial discontinuity of regional markets, presents a constraint on sustainable development. This study proposes an analytical framework of structural market segmentation, based on the process of urban agglomeration development and the heterogeneity of regional integration in both time and space, offering a novel perspective for understanding the intricate relationship between the spatial distribution of productivity and the spatial structure of regional markets. Applying city and firm-level data, this study utilizes a fixed-effects model and instrumental variables method to reveal how structural market segmentations contribute to spatial inequalities in productivity. The results indicate that structural commodity market segmentation negatively impacts productivity growth, and structural labor market segmentation exerts both growth and distributional effects on productivity, providing a reasonable explanation for spatial inequalities in productivity. And it is further amplified by associated scale effects, agglomeration economies, and the spatial distribution of industries. The government should evaluate potential side effects of policies to establish a regional development pattern of mutual benefit and win-win outcomes.
Ye et al. (Thu,) studied this question.