New Evidence about Regional Income Divergence in China

Research output: Contribution to journalArticle

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Abstract

There are many empirical studies trying to test if there is income convergence across the provinces of China. In this paper, we bring new information to the current literature by applying non-linear panel unit root test of Exponential Smooth Auto-Regressive Augmented Dickey-Fuller (ESTAR-ADF) unit root test developed by Cerrato et al. (2008) to the time series data for the period 1952–2003. The number of converging provinces decreases in the post-reform period when using panel ESTAR-ADF test. Furthermore, our results find evidence of increasing regional disparity that has been prevailing in China since the open door economic reforms of the late 1970s, which confirms the view of Pedroni and Yao (2006) that interprovincial inequalities have been widening since 1978.

In addition, we also examine the determinants of conditional convergence in China. The results indicate that low inflation, transport and telecommunication infrastructure, and trade openness could stimulate economic growth in China. Human capital also play a significant role in growth, and it exhibits non-linearity between human capital and growth in the sense that at low levels of human capital the effect on growth is negative and became positive at middle levels.
Original languageEnglish
Pages (from-to)293-309
Number of pages17
JournalChina Economic Review
Volume21
Issue number2
Early online date25 Jan 2010
DOIs
Publication statusPublished - Jun 2010

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China
Divergence
Income
Human capital
Unit root tests
Empirical study
Conditional convergence
Telecommunications
Nonlinearity
Trade openness
Augmented Dickey-Fuller test
Inflation
Economic reform
Income convergence
Panel unit root tests
Time series data
Economic growth
Regional disparities

Cite this

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title = "New Evidence about Regional Income Divergence in China",
abstract = "There are many empirical studies trying to test if there is income convergence across the provinces of China. In this paper, we bring new information to the current literature by applying non-linear panel unit root test of Exponential Smooth Auto-Regressive Augmented Dickey-Fuller (ESTAR-ADF) unit root test developed by Cerrato et al. (2008) to the time series data for the period 1952–2003. The number of converging provinces decreases in the post-reform period when using panel ESTAR-ADF test. Furthermore, our results find evidence of increasing regional disparity that has been prevailing in China since the open door economic reforms of the late 1970s, which confirms the view of Pedroni and Yao (2006) that interprovincial inequalities have been widening since 1978.In addition, we also examine the determinants of conditional convergence in China. The results indicate that low inflation, transport and telecommunication infrastructure, and trade openness could stimulate economic growth in China. Human capital also play a significant role in growth, and it exhibits non-linearity between human capital and growth in the sense that at low levels of human capital the effect on growth is negative and became positive at middle levels.",
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New Evidence about Regional Income Divergence in China. / Lau, Chi Keung Marco.

In: China Economic Review, Vol. 21, No. 2, 06.2010, p. 293-309.

Research output: Contribution to journalArticle

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