Building Bridges or Walls? Understanding Urban-Rural Price Convergence in China

Marina Glushenkova and Yingying Shi

Open Economies Review, 2024, vol. 35, issue 4, No 7, 827-854

Abstract: Abstract Market liberalization reforms in China have led to greater domestic market integration. However, significant urban-rural price differences suggest that segregation between urban and rural markets persists in China. We study the evolution of price differences between urban and rural areas across 25 Chinese provinces over the period 1985-2020. Firstly, we record a substantial and persistent gap between urban and rural price levels within each province. Secondly, we find that this gap narrowed after China implemented the Price Law, which is suggestive of deeper urban-rural integration associated with policy changes. Additionally, we observe notable differences in urban-rural price gaps between provinces, however, using the log-t test, we find evidence of regional convergence in these price gaps. Finally, we investigate the impact of transport infrastructure development on urban-rural price differences. Using spatial econometric analysis and instrumental regressions, we find that road and railway construction has a significant negative effect on the urban-rural price divide, suggesting that infrastructure development facilitates market integration between urban and rural areas in China.

Keywords: Price level; Convergence; Urban-rural gap; Infrastructure; Spatial econometric analysis (search for similar items in EconPapers)
JEL-codes: O18 O53 P25 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11079-024-09765-6 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:35:y:2024:i:4:d:10.1007_s11079-024-09765-6

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-024-09765-6

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().