Analysis Of Economic Growth Convergence And Trade In Yunnan, Guizhou And Sichuan Provinces

It’s fifteen years since China has adopted the Strategy of Developing the Western Region. The questions, how is the economic development of the western region, if there is a balanced development mechanism in this region and if the poor region can catch up with developed region, have been concerned as widening gap in regional economic in China by academia. Based on neoclassical growth theory and endogenous growth theory, we select Yunnan, Guizhou and Sichuan provinces as the representative research object. In order to compare the difference in the three provinces, we exploit annual data on state income spanning for 2000-2014 for provinces to test the hypothesis of σ and β convergence.This paper systematically reviews the neoclassical growth theory and endogenous growth theory on economic growth assumptions, model derivation and development history, and introduces the concept, source and classification of σ convergence and β convergence. We also elaborate Solow-Swan model, Romer intellectual capital spillover model and Lucas human capital model, finding that there are distinct convergence answers for these models having different assumptions. Then, this paper deeply exploits the development process of Yunnan, Guizhou and Sichuan provinces spanning for 2000-2014 by detailed charts and finds their absolute gap is widening. Furthermore, we confirm the existence of σ convergence in the three provinces by a variety of statistical indicators, like Gini coefficient, Theil index.This article applies Barro classical regression technique to the panel data model to test the absolute β convergence and conditional β convergence hypothesis in Yunnan, Guizhou and Sichuan provinces. By regression, the results are consistent with most of the literature analysis. There is no absolute β convergence of the three provinces, but when added to the population growth rate, government spending, human capital, industrial structure and other control variables affecting economic steady state, we obtain the conditional β convergence. Considering the disadvantage on traffic in Southwest region in China, the paper also examines the relation of foreign trade and economic growth convergence. After confirming the original series are I(1), we establish the panel error correction model and verify that trade has long-term dynamic relation with economic growth in the region using the PMG and MG estimation methods. Similarly, when trade is regarded as a control variable added to convergence test equation, we obtain conditional convergence conclusion in three provinces and find that trade playing a significant role in promoting economic growth.