A Spatial Econometric Analysis Of China’s Economic Growth Convergence

Since the reform and opening,the central government has propelled non-balanced economic development strategy. The non-balanced economic development strategy doesn’t only play a significant role in China’s economic growth boost,but also greatly affects the spatial allocation of production factors, such as investment and labor, and the spatial distribution of economic development, which makes China’s uneven regional economic development issues a more and more prominent problem. At the end of 2002, reducing regional disparities, and coordinating regional economic development has been put forward in third session of the 16th CPC Central Committee as one of the most important requirements for the regional balance development. After that, favorable conditions for narrowing regional development gap and promoting regional balance development gradually have come into being. So, have China’s regional economic disparities been narrowing after the reform and opening? In other words, does regional economic convergence exists in China? What are the characteristics and mechanisms of China’s regional economic convergence? This dissertation is an empirical research on these issues.In this study, in order to reflect the structural differences of China’s dual economy, we divided the space unit into two levels, taking city (excluding municipalities) and counties (including county-level cities) as the basic regional units, and the provinces (or municipalities) as the medium-scale regional units. Then, we have empirically studied the convergence characteristics and convergence mechanisms of provinces (1978 ~ 2009), cities (1990~ 2009) and counties (2000 ~ 2009), respectively. In the research, we took the linkages between regions into account, treated the spatial correlation among regions as a precondition for the economic convergence empirical analysis.The empirical study of this dissertation mainly consists of three parts: firstly, spatial econometric analysis ofσconvergence andβconvergence of China’s provinces, cities and county economic, respectively, to empirically test whether there isσconvergence andβconvergence in China’s provinces, as well as cities and counties; Secondly, to compare the convergence characteristics of China’s provinces, cities and counties. Thirdly, using analytical framework of Dowrick and Rogers (2002) to empirically analyze the economic convergence mechanism of China’s provinces, cities and counties.Main conclusions of the empirical studies are as follows:1. After considering the spatial correlation, there is noσ-convergence and absoluteβconvergence, but there is conditionalβconvergence of China’s provinces ;There is noσ-convergence for cities,either for counties, while there is absoluteβ-convergence and conditionalβconvergence for both cities and counties. The spatial correlation has significantly narrowed the economic gap among regions.2. China’s provinces, cities and counties’economic convergence have different characteristics and spatial correlation forms:Firstly, from the view ofσconvergence, provinces, cities and county have different trend of economic differences, that is, county economic differences have significantly expanded, urban economic disparity and provincial economic disparity have both been narrowed slightly in recent years.Secondly, from the view ofβconvergence, there is neither absoluteβeconomic convergence nor absoluteβdivergence for China’s provinces, while absoluteβeconomic convergence exists in the cities, as well as the counties, which shows that the gap between urban economic and county economy is the main reason that provincial economy does not tend to converge.Thirdly, from the form of spatial correlation, the provincial economy and the county economy have positive spatial lag and positive spatial error correlation, the former form is the dominated effect for provincial economy, while the latter is the dominated effect for the county economy. The urban economy has negative spatial lag correlation and positive spatial correlation, and the latter is dominated. In other words, for common exogenous shocks ,the spatial correlation among China’s urban economy is complementary, however, the impact from a city’s economic behavior to its neighboring cities is negative, which shows a kind of competitive relationship among cities. For provincial and county economy, the spatial correlation is primarily complementary, rather than competitive, whether for common exogenous shocks or neighboring economic behavior.Finally, from the empirical results of the control variables which represent the characteristics of economic growth in conditionβconvergence model, capital plays a strong positive role while labor plays a weak negative role on urban and provincial economic growth; Both capital and labor play a strong positive role on the county economic growth . Talking about the contribution of three industries to economic growth, the contribution to county economic growth comes mainly from agriculture, while the contribution to urban economic growth comes mainly from secondary industry. By contrast, service industry did not play an active role both in the county economy and urban economy. Both in urban and county economy, population growth on economic growth is negative, which indicates China’s economy is beginning to face the population aging problem, the demographic dividend have been consumed.3. Based on the convergence mechanism of neo-classical growth theory (diminishing returns of capital) and the convergence mechanism of new economic growth theory (technology diffusion), we have empirically tested the economic convergence mechanisms of China’s provinces, cities and the county’s respectively. Results show that China’s provinces, city and county convergence mechanisms are also significantly different. Provincial economic convergence mechanism represents as diminishing returns of capital, rather than technology diffusion. Convergence mechanism of the urban and county economy should be attributed to both diminishing returns of capital and technology diffusion, moreover, the role of technology diffusion is more obvious in urban economy, while diminishing returns of capital is more apparent in the county economy.