Revisiting the Role of Regional Integration in China from 1978–1992: Incentive, Pattern, and Growth

Xiaopeng Yin and Zhe Wang

China Economic Journal, 2014, vol. 7, issue 2, 261-276

Abstract: We reexamine the role of regional integration (or local protectionism) in China, by exploring its effect on local growth rates from 1978–1992, the first fifteen years of China’s economic reform and “open door” period. Our results show that at least in the initial period of China’s reform, domestic interregional trade was the main factor driving regional growth, much higher than corresponding international trade. Additionally, given such circumstances, the paper studies the effects that could have been obtained if regional, i.e., provincial, governments had put different restrictions on interregional trade, and what the incentives would be for such a policy. We find that any form of economic integration always makes both regions better off, as long as the level of technology in each region is different. We also explore other protectionist policies such as a prohibition on local human capital out-flows, and local intellectual property protection within a region. We include a discussion of relevant policies.

Date: 2014
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DOI: 10.1080/17538963.2014.933497

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