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Sources Of Divergence Between Coastal And Interior Regions In China

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  • Jongchul Lee

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    (Department of Economics, Chung-Ang University)

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    Abstract

    This paper decomposes the income divergence between coastal and interior regions into three components: a part due to the differences in the labor transfer rate between the coastal and interior regions, a second part due to the nationwide relative income gap between the nonagricultural workers and agricultural workers, and a third part due to the coast-noncoast differentials in incomes for nonagricultural and agricultural workers. We find that this third component, the coast-noncoast differentials in incomes for nonagricultural and agricultural workers, explains most of the divergence in the pre-reform period. In the post-reform period, both the regional difference in labor transfer rate and the coast-noncoast income gap for agricultural and nonagricultural workers play significant roles in explaining the divergence between the interior and the coast. Between 1978 and 1990, the different labor reallocation between the coast and interior accounted for most of the divergence. The nationwide income differentials between nonagricultural and agricultural sectors played little role in explaining the growing divergence between regions. Finally, after 1990 the largest contributor to the widening coast-noncoast income gap was the coast-noncoast divergence in incomes within the nonagricultural sector. Thus, I conclude that the removal of interregional obstacles to factor mobility, especially labor mobility, is important for reducing regional income divergence.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 31 (2006)
    Issue (Month): 2 (December)
    Pages: 123-138

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    Handle: RePEc:jed:journl:v:31:y:2006:i:2:p:123-138

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    Related research

    Keywords: Labor Reallocation Channel; Between Industry Channel; Within Industry Channel;

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    1. 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.
    2. Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
    3. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
    4. Yudon, Y. & Weeks, M., 2000. "Provincial Income Convergence in China, 1953-1997: a Panel Data Approach," Cambridge Working Papers in Economics 0010, Faculty of Economics, University of Cambridge.
    5. Lin, Justin Y & Wang, Gewei & Zhao, Yaohui, 2004. "Regional Inequality and Labor Transfers in China," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 587-603, April.
    6. John Whalley & Shunming Zhang, 2004. "Inequality Change in China and (Hukou) Labour Mobility Restrictions," NBER Working Papers 10683, National Bureau of Economic Research, Inc.
    7. 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.
    8. Du, Yang & Park, Albert & Wang, Sangui, 2005. "Migration and rural poverty in China," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 688-709, December.
    9. 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.
    10. Kanbur, Ravi & Zhang, Xiaobo, 1999. "Which Regional Inequality? The Evolution of Rural-Urban and Inland-Coastal Inequality in China from 1983 to 1995," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 686-701, December.
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