Industry Linkage, Market Thickness and the Development of Producer Services in Regional Economy: Case of Heilongjiang, China

Producer services play a strategic role in regional economy development by increase in market specialization and decrease in transaction cost. This article constructs a Cobb-Douglas Production Function of manufacturing, in which producer services were treated as an intermediate input in manufacturing. In the model, market thickness is the key determinant which exercises great influence on the development of producer services in regional market equilibrium. The Heilongjiang´s empirical results suggest that producer services do play an important role in expending the division of labor and productivity regionally, and the thickness and categories of manufacturing restrict producer services´ scale.