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Does investment allocation affect the inter-regional output gap in China? A time-series investigation

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  • Chen, Anping
  • Groenewold, Nicolaas

Abstract

Inter-regional disparities in China have been an important concern for central-government policy-makers for most of the past 60years. One of the main policy instruments for redressing the imbalance between the prosperous coastal region and the poorer inland region has been the allocation of investment spending. Yet there is little empirical work evaluating the response of disparities to changes in the regional distribution of investment. We help fill this gap and analyse the two-way relationship between these variables within a VAR/VECM framework. We find, surprisingly, that changes in the regional allocation of investment have only a modest beneficial effect on inter-regional output disparities while the effect in the opposite direction is much larger. We find this conclusion to be robust to numerous variations in variable definition. The effects of investment allocation on output disparities are larger, although, for the post-1978 period they are smaller for SOE investment.

Suggested Citation

  • Chen, Anping & Groenewold, Nicolaas, 2013. "Does investment allocation affect the inter-regional output gap in China? A time-series investigation," China Economic Review, Elsevier, vol. 26(C), pages 197-206.
  • Handle: RePEc:eee:chieco:v:26:y:2013:i:c:p:197-206
    DOI: 10.1016/j.chieco.2012.03.007
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    Cited by:

    1. Lemoine, Françoise & Poncet, Sandra & Ünal, Deniz, 2015. "Spatial rebalancing and industrial convergence in China," China Economic Review, Elsevier, vol. 34(C), pages 39-63.
    2. Anping Chen & Nicolaas Groenewold, 2017. "An increase in the retirement age in China: the regional economic effects," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 702-721, February.
    3. Chen, Anping & Groenewold, Nicolaas, 2015. "Emission reduction policy: A regional economic analysis for China," Economic Modelling, Elsevier, vol. 51(C), pages 136-152.
    4. Tang, Ya & Xu, Jianguo & Zhang, Xun, 2017. "China's investment and rate of return on capital revisited," Journal of Asian Economics, Elsevier, vol. 49(C), pages 12-25.
    5. Partridge, Mark D. & Yang, Benjian & Chen, Anping, 2017. "Do Border Effects Alter Regional Development: Evidence from China," MPRA Paper 82080, University Library of Munich, Germany.
    6. Anping Chen & Nicolaas Groenewold, 2013. "Regional Effects in China of an Emissions-Reduction Policy: Tax v. Subsidy," ERSA conference papers ersa13p1275, European Regional Science Association.
    7. Chen, Anping & Dai, Tianshi & Partridge, Mark, 2017. "Agglomeration and Firm Wage Inequality: Evidence from China," MPRA Paper 83516, University Library of Munich, Germany.
    8. Yao, Xin & Zhou, Hongchen & Zhang, Aizhen & Li, Aijun, 2015. "Regional energy efficiency, carbon emission performance and technology gaps in China: A meta-frontier non-radial directional distance function analysis," Energy Policy, Elsevier, vol. 84(C), pages 142-154.

    More about this item

    Keywords

    Regional disparities; Regional policy; China; Investment allocation;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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