Abstract: Under the realistic situation of market segmentation, how to promote regional integration and establish a national unified market has become an important issue. From the perspective of micro-enterprises, this paper investigates the regional integration effect of the administrative division adjustment led by the government-the policy of city-county merger. We find that the investment convergence of companies in the merged county and companies in the municipal district significantly increases after the city-county merger, and this result is more significant in the regions with a high degree of market segmentation and in capital-intensive companies. We further separate the learning effect between companies in the merged county and companies in the municipal district. The results show that the administrative division adjustment led by the government can effectively promote the linkage of companies in municipal districts and in counties, thus promoting the integration of regional markets.

Key words: administrative division adjustment, city-county merger, investment convergence, regional integration