Regional Disparity, Transitional Dynamics and Convergence in China

Most studies of regional inequality in China are based on provincial level data with a few papers focusing on intra-provincial regional inequality. The objective of this study is to fill the void in the literature by using county-level data which cover 1485 counties and county-level cities in 22 provinces for the period of 1997-2007. This paper makes several contributions to the literature. First, the disparity between city and county subgroups within each province is examined. Second, the transitional dynamics of regional inequality are investigated for different spatial groups using the Markov transition matrix approach. Third, the stochastic kernel technique is applied to investigate convergence of the county-level units as a whole. The findings in this paper show high persistence in many spatial groups. Thus the poor county-level units may remain relatively poor over time. The model provides very little evidence of convergence to the mean income in various spatial groups. The empirical analysis highlights differences in transitional dynamics between cities and counties.