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Reducing Regional Disparities in China: An Evaluation of Alternative Policies

Author

Listed:
  • Anping Chen

    (School of Economics, Jinan University)

  • Nicolaas Groenewold

    (UWA Business School, The University of Western Australia)

Abstract

Regional disparities in output per capita and income in China are large and persistent. They have been the subject of considerable concern to policy-makers at the highest level for decades, yet little is known about the effectiveness of various alternative policies which may be used to combat them. In this paper we address this issue by analysing the effectiveness of a range of policies by both regional and central governments. We use a small model with various features of the Chinese economy: two regions (the interior and the coast), two industries (agriculture and manufacturing), inter-regional capital mobility, internal migration subject to the hukou system of household registration and some features of the Chinese tax and expenditure system. The model is calibrated to Chinese data and simulated to analyse the effects of a number of policies on a range of variables but focussing on per capita output disparities and welfare. We find that a policy reducing internal migration costs is effective in reducing the per capita output gap but does so at a substantial cost to the coast. Policies which improve agricultural productivity in the interior region are most likely to both reduce the gap and make both regions better off. Changes in government consumption expenditure, central government fiscal redistributions and tax cuts, on the other hand, are less effective and have their long-run effectiveness reduced by migration.

Suggested Citation

  • Anping Chen & Nicolaas Groenewold, 2009. "Reducing Regional Disparities in China: An Evaluation of Alternative Policies," Economics Discussion / Working Papers 09-06, The University of Western Australia, Department of Economics.
  • Handle: RePEc:uwa:wpaper:09-06
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    References listed on IDEAS

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    Cited by:

    1. Anping Chen & Mark D. Partridge, 2013. "When are Cities Engines of Growth in China? Spread and Backwash Effects across the Urban Hierarchy," Regional Studies, Taylor & Francis Journals, vol. 47(8), pages 1313-1331, September.
    2. Dong, Liang & Liang, Hanwei & Gao, Zhiqiu & Luo, Xiao & Ren, Jingzheng, 2016. "Spatial distribution of China׳s renewable energy industry: Regional features and implications for a harmonious development future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 1521-1531.
    3. Almås, Ingvild & Johnsen, Åshild Auglænd & Kotsadam, Andreaa, 2014. "Poverty in China Seen from Outer Space," Memorandum 11/2014, Oslo University, Department of Economics.
    4. Iris Claus & Les Oxley & Siqi Zheng & Cong Sun & Ye Qi & Matthew E. Kahn, 2014. "The Evolving Geography Of China'S Industrial Production: Implications For Pollution Dynamics And Urban Quality Of Life," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 709-724, September.
    5. repec:eee:chieco:v:47:y:2018:i:c:p:96-115 is not listed on IDEAS
    6. Lee, Wai Choi & Cheong, Tsun Se & Wu, Yanrui, 2017. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," ADBI Working Papers 651, Asian Development Bank Institute.
    7. Tsun Se Cheong & Yanrui Wu, 2013. "Globalization and Regional Inequality," Economics Discussion / Working Papers 13-10, The University of Western Australia, Department of Economics.
    8. Wu, Mingqin & Chen, Bin, 2016. "Assignment of provincial officials based on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 38(C), pages 60-75.
    9. 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.
    10. Vu, Binh & Nguyen, Tom & Smith, Christine & Nghiem, Son, 2015. "Vietnam's responses to provincial economic disparities through central-provincial government financial relations," MPRA Paper 67705, University Library of Munich, Germany, revised 2014.
    11. Tian, Xu & Zhang, Xiaoheng & Zhou, Yingheng & Yu, Xiaohua, 2016. "Regional income inequality in China revisited: A perspective from club convergence," Economic Modelling, Elsevier, vol. 56(C), pages 50-58.
    12. 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.

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