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Reducing regional disparities in China: An evaluation of alternative policies

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  • Chen, Anping
  • Groenewold, Nicolaas

Abstract

Regional disparities in output per capita and income in China are large and persistent. They have been the subject of considerable concern to policy-makers at the highest level for decades, yet little is known about the effectiveness of various alternative policies which may be used to combat them. In this paper we address this issue by analysing the effectiveness of a range of policies by both regional and central governments. We use a small model with various features of the Chinese economy: two regions (the interior and the coast), two industries (agriculture and manufacturing), inter-regional capital mobility, internal migration subject to the hukou system of household registration and some features of the Chinese tax and expenditure system. The model is calibrated to Chinese data and simulated to analyse the effects of a number of policies on a range of variables but focussing on per capita output disparities and welfare. We find that a policy reducing internal migration costs is effective in reducing the per capita output gap but does so at a substantial cost to the coast. Policies which improve agricultural productivity in the interior region are most likely to both reduce the gap and make both regions better-off. Changes in government consumption expenditure, central government fiscal redistributions and tax cuts, on the other hand, are less effective and have their long-run effectiveness reduced by migration.

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Bibliographic Info

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

Volume (Year): 38 (2010)
Issue (Month): 2 (June)
Pages: 189-198

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Handle: RePEc:eee:jcecon:v:38:y:2010:i:2:p:189-198

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Web page: http://www.elsevier.com/locate/inca/622864

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Keywords: Regional disparities China Numerical modelling Hukou;

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References

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Cited by:
  1. Chen, Anping & Groenewold, Nicolaas, 2013. "Does investment allocation affect the inter-regional output gap in China? A time-series investigation," China Economic Review, Elsevier, Elsevier, vol. 26(C), pages 197-206.
  2. Tsun Se Cheong & Yanrui Wu, 2013. "Globalization and Regional Inequality," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 13-10, The University of Western Australia, Department of Economics.
  3. Siqi Zheng & Cong Sun & Ye Qi & Matthew E. Kahn, 2013. "The Evolving Geography of China’s Industrial Production: Implications for Pollution Dynamics and Urban Quality of Life," NBER Working Papers 19624, National Bureau of Economic Research, Inc.

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