Path selection of urban‑scale regulation policies in China in the new era: a perspective from utilizing positive agglomeration externalities

Agglomeration economy is the core driving force for urban development, and its externality provides space for policy intervention. China’s urban‑scale regulation policies mostly focus on the governance of negative agglomeration externalities, while paying insufficient attention to policies oriented towards the utilization of positive agglomeration externalities. This article constructs a spatial equilibrium model integrating positive agglomeration externalities to theoretically analyse the path selection of urban‑scale regulation policies. The research finds that the policy of fully internalizing agglomeration economy through wage subsidies is the theoretically optimal policy, as it can fully release the benefits of agglomeration economy and maximize social surplus. Without instruments to internalize agglomeration economy, the differentiated land development tax policy based on the gap between social marginal productivity and average productivity can guide the population to cities with high-level agglomeration economy and effectively control the excessive creation of new cities, thereby improving the utilization efficiency of agglomeration economy and social surplus. Therefore, it serves as a feasible suboptimal policy. The uniform development subsidy or tax policy that ignores the heterogeneity of urban agglomeration economy aggravates the imbalance of urban‑scale distribution through misaligned incentives or excessive constraints, making it an inferior policy.