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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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Suggested Citation

  • Pedroni, Peter & Yao, James Yudong, 2006. "Regional income divergence in China," Journal of Asian Economics, Elsevier, vol. 17(2), pages 294-315, April.
    • Handle: RePEc:eee:asieco:v:17:y:2006:i:2:p:294-315
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    More about this item

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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