An Empirical Study On Convergence And The Regional Disparities In China

Regional disparity is one of the most important tasks that macroeconomic adjustment seeking to solve. For the regional disparity has been in existence for a long time during the regional economic development in China, we need to investigate the reasons and rules of the occurrence and evolution of it, so as to evaluate its impact on the development of economy and society and predict its trend of evolution, as well as puts up appropriate regional economic policies.There are many researches on China's regional disparity, but few of them link it with the convergence theory to discuss. Based on the convergence theory, the paper carefully studies the regional disparity in China. Firstly, the paper sums up the different definitions and testing measures of convergence, especially the origin of convergence in the economic growth theory. Secondly, it tests the convergence of China's economic growth and reviews the evolution of China's regional disparity, and analyzes the sources of regional disparity through growth accounting. In conclusion, the paper puts up relevant policies.Based on an introduction to the particular definition and testing measure of convergence, the paper investigates the convergence of China's economic growth over the sample period 1952-2004 and 1978-2004. It concludes that there is no conditional convergence in China as a whole, but there exists club convergence indeed. Whether for the whole country, or the four regions of China, such as the Northeast Region, the Eastern Region, the Center Region and the Western Region as a whole alone, there exists divergence instead of conditional convergence. It indicates that China's economy, as a whole can't reach the stead state predicted by the neoclassical economic theory, and that if we let the economy goes without any policy interventions, the regional disparity in China will become more and more serious in future; at the same time, the paper finds that there exists club convergence in the three regions for the four regions in China, which in accordance with many researches in existence. During the period 1952-2004,there exists club convergence in the Center Region and the Western region, while the other regions are divergent; during the period 1978-2004,there exist club convergences in the Eastern region, the Western region and the Northeast Region except the Center Region. The existence of club convergences shows that there are many similarities in the scale and industrial structures of the economy inside the regions, which also indicates that the neighboring provinces tend to have similar social and economic environment and similar path of economic development.By applying the Theil index to analyze the regional disparity in China, the paper finds that the regional disparity is widening, but there is a turn since the carrying out of the strategy of developing the Western Region. There are three stages of development of regional disparity in China during the period 1952-2004.In the first stage, which started from 1952 to 1978,there were many fluctuations in the regional disparity, and the regional disparity was continuously widened. And the value of the Theil index was 0.3273,which was the biggest since the foundation of the PRC. From 1978 to 1990,which is the period of China's Reform and Opening to the outside world, the Theil index declined a lot in the 1980s,which is from 0.2990 in 1978 to 0.2432 in 1990,and the latter is the lowest value since 1978.Since 1990,the regional disparity slowly goes up, which ceased from the initiative of the strategy of developing the Western Region. But we should be watchful that the economic growth the Western Region is pushed by the investment in infrastructure from government securities and central budgetary appropriation. As an answer, the government should take efficient measures to establish systems and mechanisms that can make the economic growth sustainable.In particular, by applying the two-stage nested Theil decomposition method, which is an extension of the ordinary one-stage Theil decomposition method, the paper finds that the main sources of China's regional disparity are within-province inequalities instead of between-region inequalities. The contribution of within-province inequalities to the overall regional inequalities is bigger than the sum of the between-province inequalities and the between-province inequalities.By applying the growth accounting method, the paper presents the output elasticity of the physical capital, labor and human capital in each region, on which the paper analyzes the effects of the factors on the patterns of the regional disparity. And the paper finds that the main sources of the regional disparity are the input of physical capital and the Total Factor Productivity.In conclusion, the paper puts up some relevant policies to reduce the regional disparity, and presents some issues that can be further studied in future.