Regional Income Divergence in China

Peter Pedroni and James Yudong Yao
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James Yudong Yao: International Monetary Fund

No 2005-03, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: Numerous policy studies have argued that conditions have prevailed in China since the open door economic reforms of the late 1970s that have encouraged rapid growth at the expense of regional income inequality across the provinces of China. In this paper we use recently developed nonstationary panel techniques to provide empirical support for the fact that the long run tendency since the reforms has been for provincial level incomes to continue to diverge. More importantly, we show that this divergence cannot be attributed to the presence of separate, regional convergence clubs divided among common geographic subgroupings such as the coastal versus interior provinces. Furthermore, we also show that the divergence cannot be attributed to differences in the degree of preferential open-door policies. Rather, we find that the divergence is pervasive both nationally and within these various regional and political subgroupings. We argue that these results point to other causes for regional income divergence, and they also carry potentially important implications for other regions of the world.

Keywords: China; convergence; nonstationary panels (search for similar items in EconPapers)
JEL-codes: C33 O53 R11 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2005-08
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Published in Journal of Asian Economics, April 2006, v. 17, iss. 2, pp. 294-315.

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