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Sources of Income Differences Across Chinese Provinces During the Reform Period: A Development Accounting Exercise

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  • Rui Hao

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • Zheng Wei

Abstract

The present paper performs a development accounting analysis to investigate the sources of China's interprovincial income inequality over the period 1982–2005. We estimate a Cobb–Douglas aggregate production function with various specifications. Using the estimated parameters, we conduct a development accounting analysis as well as a variance decomposition. Our results suggest that differences in physical capital intensity and in total factor productivity are both important sources of cross-province income differences, each accounting for roughly half of the variation in income levels. Differences in human capital explain only a small amount of income differences across provinces. The results are robust to whether or not the assumption of constant returns to scale is imposed. The interaction between factor accumulation and total factor productivity is also discussed.

Suggested Citation

  • Rui Hao & Zheng Wei, 2009. "Sources of Income Differences Across Chinese Provinces During the Reform Period: A Development Accounting Exercise," Post-Print hal-00364791, HAL.
    • Handle: RePEc:hal:journl:hal-00364791
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    Cited by:

    1. Farhad Noorbakhsh & Zhikai Wang, 2010. "Interprovincial disparities in China since the reforms: convergence or divergence?," Working Papers 2010_11, Business School - Economics, University of Glasgow.
    2. Guangdong Li & Chuanglin Fang, 2014. "Analyzing the multi-mechanism of regional inequality in China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 155-182, January.
    3. Emanuele Felice & Iacopo Odoardi & Dario D’Ingiullo, 2023. "The Chinese Inland-Coastal Inequality: The Role of Human Capital and the 2007–2008 Crisis Watershed," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 9(2), pages 761-788, July.
    4. Tian, Xu & Zhang, Xiaoheng & Zhou, Yingheng & Yu, Xiaohua, 2016. "Regional income inequality in China revisited: A perspective from club convergence," Economic Modelling, Elsevier, vol. 56(C), pages 50-58.

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