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Subsidising inequality: Economic reforms, fiscal transfers and convergence across Chinese provinces

Listed author(s):
  • Martin Raiser

The article investigates per capita income convergence across Chinese provinces over the 1978-92 period. It confirms previous studies which find a reduction in inter-regional income inequality over the course of economic reforms. However, the rate of convergence has declined since 1985 as a result of two factors. First, the shift from rural to industrial reforms has disproportionately benefited the relatively wealthier coastal provinces. Second, the system of inter-provincial fiscal transfers has prevented convergence among interior provinces, as transfers have gone to the richer among them. Further fiscal decentralisation and an acceleration of reforms in the interior provinces is thus unlikely to increase regional income inequality.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00220389808422518
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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 34 (1998)
Issue (Month): 3 ()
Pages: 1-26

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Handle: RePEc:taf:jdevst:v:34:y:1998:i:3:p:1-26
DOI: 10.1080/00220389808422518
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  1. Sala-i-Martin, Xavier X, 1996. "The Classical Approach to Convergence Analysis," Economic Journal, Royal Economic Society, vol. 106(437), pages 1019-1036, July.
  2. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
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  4. 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.
  5. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
  6. Raiser, Martin, 1995. "Decentralisation, autonomy and efficiency: Inconsistent reforms and enterprise performance in China," Kiel Working Papers 689, Kiel Institute for the World Economy (IfW).
  7. Gundlach, Erich, 1996. "Solow meets market socialism: regional convergence of output per worker in China," Kiel Working Papers 726, Kiel Institute for the World Economy (IfW).
  8. Hay, Donald & Morris, Derek & Liu, Guy & Yao, Shujie, 1994. "Economic Reform and State-Owned Enterprises in China 1979-87," OUP Catalogue, Oxford University Press, number 9780198288459.
  9. Erich Gundlach, 1997. "Openness and economic growth in developing countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(3), pages 479-496, September.
  10. Jefferson, Gary H & Rawski, Thomas G & Yuxin, Zheng, 1992. "Growth, Efficiency, and Convergence in China's State and Collective Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 40(2), pages 239-266, January.
  11. Groves, Theodore & Yongmiao Hong & John McMillan & Barry Naughton, 1995. "China's Evolving Managerial Labor Market," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 873-892, August.
  12. W, Y, 1995. "Productivity Growth, Technological Progress, and Technical Efficiency Change in China: A Three-Sector Analysis1," Journal of Comparative Economics, Elsevier, vol. 21(2), pages 207-229, October.
  13. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1127-1170.
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