Working Paper: CEPR ID: DP2887
Authors: Ravi Kanbur; Xiabo Zhang
Abstract: This Paper constructs and analyses a long run time series for regional inequality in China from the Communist Revolution to the present. There have been three peaks of inequality in the last fifty years, coinciding with the Great Famine of the late 1950s, the Cultural Revolution of the late 1960s and the 1970s, and finally the period of openness and global integration in the late 1990s. Regional inequality in China in 1999 exceeds the level experienced at its peak in the Cultural Revolution, and is near the peak level of inequality experienced during the Great Famine. Econometric analysis establishes that regional inequality is explained in the different phases by three key variables—the ratio of heavy industry to gross output value, the degree of centralization, and the degree of openness. Inequality has increased alongside spectacular performance in growth and poverty reduction. As China enters the WTO, pro-active measures encouraging liberalisation and investment in the inland regions may be required to promote more equitable growth in the future.
Keywords: Chinese economy; decentralization; industrialization; inequality; openness; polarization
JEL Codes: D63; O18; P27
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Heavy industry prioritization during prereform period (L52) | Widening rural-urban divide (R11) |
| Heavy industry prioritization during prereform period (L52) | Overall inequality (D31) |
| Decentralization (H77) | Rural-urban polarization (R11) |
| Decentralization (H77) | Inland-coastal polarization (R12) |
| Greater openness after integration into global economy (F69) | Inland-coastal disparities (R12) |
| Heavy industry prioritization during prereform period (L52) | Inequality (D63) |