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Provincial Conditional Income Convergence in China, 1953-1997: A Panel Data Approach

Melvyn Weeks and James Yudong Yao

Econometric Reviews, 2003, vol. 22, issue 1, 59-77

Abstract: This paper examines the tendency towards income convergence among China's main provinces during the two periods: the pre-reform period 1953-1977 and the reform period 1978-1997 using the framework of the Solow growth model. The panel data method accounts for not only province-specific initial technology level but also the heterogeneity of the technological progress rate between the fast-growing coastal and interior provinces. Estimation problems of weak instruments and endogeneity are addressed by the use of a system generalized method of moments (GMM) estimator. The main empirical finding is that there is a system-wide income divergence during the reform period because the coastal provinces do not share a common technology progress rate with the interior provinces.

Date: 2003
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Handle: RePEc:taf:emetrv:v:22:y:2003:i:1:p:59-77