The Impact on Regional Economic Growth of Private Capital Agglomeration An Empirical Study Based on Wenzhou's Experience

Wenzhou people are famous for their hanging together and pooling their sporadic idle private capital. The impact on regional economic growth of this agglomeration of private capital is typical of Putnam's Paradox: with both a positive and a negative impact. By improving the symmetry of information and reducing the moral hazard, the private capital agglomeration network is constructive to the agglomeration of private capital, the dissemination of information and efficiency improvement of capital allocation so as to promote regional economic growth; Its sole purpose of profit seeking makes difficult the coordination between private capital and public capital, leads to lack of goal congruence between what private capital are after and what the local government is pursuing in its economic development and undermines the stability and sustainability of regional economic growth. To reduce or eliminate this kind of negative impact, a coordinating mechanism of various kinds of capital should be established to regulate and lead the investment of private capital and tax incentives and financial subsidies should also be provided to encourage private capital to invest in R&D and technological innovation.