| Abstract | Theoretically speaking, infrastructure as the social overhead capital is good for breaking the domestic market segmentation to some extent in order to lay the foundation for the modern market system. In this paper, we based on the theory of new economic geography, utilized China's inter provincial panel data from 1993 to 2012,used spatial panel Dubin model to analyze the effect of China's infrastructure on market segmentation .The empirical results show that, the phenomenon of beggar-thy-neighbor still exists in China for a long period of time, and the degree decreases in time series; Moderate infrastructure construction as the material basis can break market segmentation, which can provide theoretical support for the government to strengthen infrastructure construction; Spatial spillover of infrastructure has a negative effect which is stronger than direct effect. Based on this, the government should strengthen the investment subject’ cross regional collaboration , weaken the adverse effect on the geographical boundaries of the market; At the same time, we should pay attention to the quality of infrastructure investment, narrow the gap of different areas; In addition, the government also needs to optimize the fiscal expenditure, reduce the distortion of the allocation of resources and the degree of efficiency loss, realize the market’ decisive role in the allocation of resources in order to establish the modern market system. |