Intra-Provincial Inequalities and Economic Growth in China

This paper approaches the problem of inequalities in China. It is specifically focused on analyzing the effects of intra-provincial disparities on provincial economic development. Rising inequalities have been widely discussed in the literature on the examples of fast growing developing countries like Brazil, India. However, each of these countries existed in a different socio-political context. Should and is anything done to contain the rising inequalities? This is something the world is struggling now not only with respect to the Chinese case. In the broadest sense, there seem to be two kinds of answers. One, more “European”, or “social/Christian/democratic” is that too much inequality is morally hard to accept and also bad for social cohesion. Another, more neo-liberal or “American” says that while much should be done to alleviate poverty, economic inequality is not a reason for concern, that it is inevitable (reflecting varying endowments of individuals) and in some way also positive as motivating for work and innovation. Inequalities, as measured by Theil index, seem to be positively related to growth. However, a more profound analysis suggests highly diversified patterns, which suggests many conclusions about actual policy-making standards in China.