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Half a World: Regional inequality in five great federations

  • Branko Milanovic

    (World Bank; Carnegie Endowment)

The paper studies regional (spatial) inequality in five most populous countries in the world: China, India, the United States of America, Indonesia and Brazil in the period 1980-2000. They are all federations composed of entities (states or provinces) with substantial autonomy. Two types of regional inequalities are considered: Concept 1 inequality which is inequality between mean incomes (GDPs per capita) of states/provinces and Concert 2 inequality which is inequality between population-weighted regional mean incomes. The first inequality speaks to the issues of income convergence, the second, to the issue of overall inequality as perceived by citizens within a nation. China and India show rising inequality in terms of both concepts in the decade of the 1990’s; Indonesia, on the contrary, displays decreasing inequality in both from the early 1980’s up to the Asian crisis. Overall, we find that openness is negatively associated with Concept 1 regional inequality, and positively with Concept 2 inequality. Openness thus seems to help poorer regions (within nations) to catch up, but also leads to disparity in outcomes for populous states with some getting ahead and others falling behind. Maharashtra vs. Bihar, and Shandong vs. Sichuan provide nice examples of such outcomes in India and China. Higher inflation and higher real interest rate are also associated with greater Concept 2 regional inequality.

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File URL: http://128.118.178.162/eps/urb/papers/0404/0404002.pdf
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Paper provided by EconWPA in its series Urban/Regional with number 0404002.

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Length: 60 pages
Date of creation: 12 Apr 2004
Date of revision:
Handle: RePEc:wpa:wuwpur:0404002
Note: Type of Document - pdf; pages: 60
Contact details of provider: Web page: http://128.118.178.162

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  1. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  2. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January.
  3. Akita, Takahiro & Kawamura, Kazumi, 2002. "Regional income inequality in China and Indonesia: A comparative analysis," ERSA conference papers ersa02p432, European Regional Science Association.
  4. Branko Milanovic, 2002. "True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone," Economic Journal, Royal Economic Society, vol. 112(476), pages 51-92, January.
  5. Bliss, Christopher, 1999. "Galton's Fallacy and Economic Convergence," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 4-14, January.
  6. Carlos R. Azzoni, 2001. "Economic growth and regional income inequality in Brazil," The Annals of Regional Science, Springer, vol. 35(1), pages 133-152.
  7. Dabus, Carlos, 2000. "Inflationary regimes and relative price variability: evidence from Argentina," Journal of Development Economics, Elsevier, vol. 62(2), pages 535-547, August.
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  9. Ram, Rati, 1992. "Interstate Income Inequality in the United States: Measurement, Modelling and Some Characteristics," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(1), pages 39-48, March.
  10. Carsten A. Holz, 2004. "China's Statistical System in Transition: Challenges, Data Problems, and Institutional Innovations," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(3), pages 381-409, 09.
  11. Yao, Shujie & Zhang, Zongyi, 2001. "On Regional Inequality and Diverging Clubs: A Case Study of Contemporary China," Journal of Comparative Economics, Elsevier, vol. 29(3), pages 466-484, September.
  12. Mitsuhiko Kataoka & Takahiro Akita, 2003. "Regional Income Inequality in the Post-War Japan," ERSA conference papers ersa03p480, European Regional Science Association.
  13. Scharping, Thomas, 2001. "Hide-and-seek: China's elusive population data," China Economic Review, Elsevier, vol. 12(4), pages 323-332.
  14. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
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