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Rising regional inequality in China: Policy regimes and structural changes*

Chun-Yu Ho () and Dan Li ()

Papers in Regional Science, 2008, vol. 87, issue 2, 245-259

Abstract: Abstract. Regional inequality is severe in China since regional development is uneven due to various initial conditions and government policies. We employ unit root tests allowing for structural breaks to alternative inequality measures from 1952 to 2000. Empirical results indicate that (1) the regional inequality is trend stationary with structural breaks rather than following a random walk. Thus, ignoring structural changes might leads to incorrect inference and misleading policy implications; (2) the break points are associated with episodic events in Chinese economic history such as the Cultural Revolution and market reforms. This implies that the policies had a long‐lasting and fundamental effect on the inequality. Resumen. La desigualdad regional en China es pronunciada debido a un desarrollo regional dispar causado por un número de condiciones iniciales y políticas gubernamentales. Empleamos pruebas de raíz unitaria que permiten rupturas estructurales (structural breaks) en medidas de desigualdad alternativas desde 1952 al 2000. Los resultados empíricos indican que (1) la desigualdad regional es de tendencia estacionaria con rupturas estructurales en lugar de seguir un paseo aleatorio (random walk). Por tanto, el ignorar cambios estructurales podría llevar a una inferencia incorrecta e implicaciones políticas engañosas; (2) los puntos de ruptura están asociados con acontecimientos episódicos de la historia económica china como la Revolución cultural y las reformas del mercado. Esto implica que las políticas tuvieron un efecto duradero y fundamental en la desigualdad.

Date: 2008
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Working Paper: Rising Regional Inequality in China:Policy Regimes and Structural Changes (2007)
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Handle: RePEc:bla:presci:v:87:y:2008:i:2:p:245-259