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Regional income divergence in China

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  • Pedroni, Peter
  • Yao, James Yudong

Abstract

Numerous policy studies have argued that conditions have prevailed in China since the open door economic reforms of the late 1970s that have encouraged rapid growth at the expense of regional income inequality across the provinces of China. In this paper we use recently developed nonstationary panel techniques to provide empirical support for the fact that the long run tendency since the reforms has been for provincial level incomes to continue to diverge. More importantly, we show that this divergence cannot be attributed to the presence of separate, regional convergence clubs divided among common geographic subgroupings such as the coastal versus interior provinces. Furthermore, we also show that the divergence cannot be attributed to differences in the degree of preferential open-door policies. Rather, we find that the divergence is pervasive both nationally and within these various regional and political subgroupings. We argue that these results point to other causes for regional income divergence, and they also carry potentially important implications for other regions of the world.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 17 (2006)
Issue (Month): 2 (April)
Pages: 294-315

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Handle: RePEc:eee:asieco:v:17:y:2006:i:2:p:294-315

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  1. Dwayne Benjamin & Loren Brandt & John Giles, 2003. "The Evolution of Income Inequality in Rural China," Working Papers benjamin-04-01, University of Toronto, Department of Economics.
  2. Evans, Paul, 1998. "Using Panel Data to Evaluate Growth Theories," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 295-306, May.
  3. Jian, Tianlun & Sachs, Jeffrey D. & Warner, Andrew M., 1996. "Trends in regional inequality in China," China Economic Review, Elsevier, vol. 7(1), pages 1-21.
  4. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  5. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
  6. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  7. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April.
  8. Sylvie Demurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao, Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," NBER Working Papers 8897, National Bureau of Economic Research, Inc.
  9. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
  10. Tianlun Jian & Jeffrey D. Sachs & Andrew M. Warner, 1996. "Trends in Regional Inequality in China," NBER Working Papers 5412, National Bureau of Economic Research, Inc.
  11. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," NBER Working Papers 7828, National Bureau of Economic Research, Inc.
  12. Alwyn Young, 2000. "The Razor'S Edge: Distortions And Incremental Reform In The People'S Republic Of China," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1091-1135, November.
  13. Martin Raiser, 1998. "Subsidising inequality: Economic reforms, fiscal transfers and convergence across Chinese provinces," Journal of Development Studies, Taylor & Francis Journals, vol. 34(3), pages 1-26.
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