Convergence across Chinese provinces: An analysis using Markov transition matrix

This paper adopts the distribution approach to study convergence across Chinese provinces. In particular, it uses the Markov transition matrix methodology to capture the dynamics embodied in the data and to produce corresponding ergodic distributions. The results indicate that distribution of per capita income across Chinese provinces has become bi-modal over the period of 1952-2003. However, a closer examination shows that the dynamics contained in the pre- and post-reform periods are different, producing very different types of ergodic distribution. While the ergodic distribution based on the pre-reform dynamics proves to be positively skewed, the one based on the post-reform period's dynamics proves to be negatively skewed. On balance, whether per capita income level of the Chinese provinces will converge soon still remains an open question.