The Rising Tides That Lift the Boats: Growth through Heterogeneous Convergence in Chinese Provinces

Kian Ong, Kent Matthews and Baoshun Wang ()
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Baoshun Wang: Zhongnan University of Economics & Law

Open Economies Review, 2024, vol. 35, issue 4, No 4, 778 pages

Abstract: Abstract Does China pull up its 31 mainland provinces as it converges to the incomes of advanced economies? The conventional method of modelling convergence in the Chinese provinces has been the Barro approach. This paper models convergence through a common factor, interpreted as the rising tides that lift the boats—the growth of China lifts its provinces. We question the conventional (Barro in Q J Econ 106:407–443 1991) definition of convergence. Imposing a common convergence rate across provinces would bias the convergence rate towards zero. We focus on the heterogeneous model where the convergence rate and long-run elasticity to the common factor differ across provinces. The rising tides of growth disproportionately benefit the poorer provinces and lifts the poor provinces more than the wealthier ones. This reveals the effects of transfer from the coastal provinces that developed first to the inner provinces that developed later.

Keywords: C33; O47; Economic growth; Convergence; Heterogeneity; Common factor (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11079-024-09755-8

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