China's provincial disparities and the determinants of provincial inequality
The paper explains the growth-inequality nexus for China's provinces. The theoretical model of provincial development consists of two regions and studies the interactions of a mutually dependent development process. Owing to positive externalities, incoming trade and FDI induce imitation and hence productivity growth. The regional government can influence the economy by changing international transaction costs and providing a public infrastructure. Mobile domestic capital reinforces disparity effects. The implications of the theoretical model are tested. As the central intention of the paper is to explain provincial disparity, we directly relate income disparity (indicated by the contribution to the per capita income Theil index) to the disparity of selected income determining factors (indicated by the contribution to every other Theil index of the determinants). We examine the determinants of inequality for 28 Chinese provinces over the period 1991-2004 and apply a fixed effects panel estimation. The results confirm the theoretical framework and suggest a direct link between the factors that determine regional income and regional disparity. More specifically, it is apparent that disparities in trade, foreign and domestic capital and infrastructure have an impact on the provincial income Theil disparity, whereas provincial disparities in government expenditure and human capital do not seem to drive the income Theil disparity. Therefore, three decades of government reforms led to an extraordinary success of some provinces and increasing inequality. However, government expenditures and public human capital investments seemed to have a stabilizing effect on provincial disparity.
Volume (Year): 7 (2009)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RCEA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RCEA20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kanbur, Ravi & Zhang, Xiaobo, 2004.
"Fifty Years of Regional Inequality in China: A Journey through Central Planning, Reform, and Openness,"
WIDER Working Paper Series
050, World Institute for Development Economic Research (UNU-WIDER).
- Ravi Kanbur & Xiaobo Zhang, 2004. "Fifty Years of Regional Inequality in China: A Journey Through Central Planning, Reform and Openness," Working Papers 158, Institute for Social and Economic Change, Bangalore.
- Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
- Spilimbergo, Antonio & Londono, Juan Luis & Szekely, Miguel, 1999. "Income distribution, factor endowments, and trade openness," Journal of Development Economics, Elsevier, vol. 59(1), pages 77-101, June.
- Antonio Spilimbergo & Juan Luis Londoño & Miguel Székely, 1997. "Income Distribution, Factor Endowments, and Trade Openness," Research Department Publications 4088, Inter-American Development Bank, Research Department.
- Antonio Spilimbergo & Juan Luis Londoño & Miguel Székely, 1997. "Income Distribution, Factor Endowments, and Trade Openness," IDB Publications (Working Papers) 6803, Inter-American Development Bank.
When requesting a correction, please mention this item's handle: RePEc:taf:jocebs:v:7:y:2009:i:2:p:259-281. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.