| Abstract | This paper analyzes the effect of segmentation from both theoretical and empirical perspectives. It is found that under competition among heterogeneous producers with linear demand and cost function, market segmentation will accelerate regional economic growth through high industrial similarity. But under production competition, market segmentation will do harm to the whole economy. While under price competition, market segmentation will do good to the whole economy in a limited scope. In order to measure the effect of active segmentation on growth, we combine “Production Method” and “Price Method” to construct a new sample, based on which the panel data are processed by virtue of varying coefficient models. We find that every province has at least one strong stable competitor in industry development and the active segmentation which may has close relationship with corruption is also very stable. What’s more, active segmentation will accelerate regional economic growth through the media of industrial similarity, which is constrained, to some extent, by opening policy and business cycle. So reducing industrial similarity is the only path to eliminate segmentation and realize market integration. |