New evidence about regional income divergence in China

Lau, Chi Keung (2010) New evidence about regional income divergence in China. China Economic Review, 21 (2). pp. 293-309. ISSN 1043-951X

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Official URL: http://dx.doi.org/10.1016/j.chieco.2010.01.003

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.

Item Type: Article
Uncontrolled Keywords: China regional conditional and unconditional income convergence, panel non-linear unit root test, ESTAR
Subjects: N100 Business studies
N300 Finance
Department: Faculties > Business and Law > Newcastle Business School > Business and Management
Depositing User: Ellen Cole
Date Deposited: 28 Aug 2013 10:47
Last Modified: 04 Dec 2015 13:11
URI: http://nrl.northumbria.ac.uk/id/eprint/13410

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