The Balassa-Samuelson effect and inflation in the Chinese provinces
The Balassa-Samuelson effect is employed to explain the observed differences in inflation between the Chinese provinces. A three-good model is proposed to better take account of the specific features of China. This model which includes, besides Balassa-Samuelson effect, demand side factors, is tested for 29 Chinese provinces using cross-sectional and panel data for the 1992-1999 period. The econometric results show that the hypothesis that the Balassa-Samuelson effect explains the durable differences in inflation between provinces is not refuted. This suggests that the Chinese economy broadly works as a market economy.
|Date of creation:||2001|
|Date of revision:|
|Publication status:||Published in China Economic Review, 2002, pages 134-160|
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