Clustering, growth and inequality in China

Reversal of fortune: geography and institutions in the making of the modem world income distribution

Di Guo, Kun Jiang, Chenggang Xu and Xiyi Yang

Journal of Economic Geography, 2020, vol. 20, issue 5, 1207-1239

Abstract: This study examines the effects of China’s industrial clusters on regional economic growth and urban–rural income inequality within a region. A density-based index (DBI) is developed to capture the unique features of cluster development in China. From a county-level DBI panel data constructed based on firm- and county-level datasets, we find that clusters enhance local economic growth substantially. Moreover, the existence of entrepreneurial clusters (clusters mainly consist of nonstate-owned firms) helps to reduce local urban–rural income inequality by increasing the income of local rural residents. We also find that the clustering effects on growth and reduction of inequality are less significant in more urbanized regions or megacities. Identification issues are carefully addressed by deploying two-stage estimations with instrumental variables and Granger test.

Keywords: China; clustering; geography; growth and inequality; institutions (search for similar items in EconPapers)
JEL-codes: D22 O14 O15 R11 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (12)

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