Income Disparities across Chinese Provinces: Revisiting the Convergence-Divergence Debate

The literature on income disparities across China’s provinces suggests that there has been (absolute) divergence in per capita incomes since 1978, a trend which has accelerated since the early 1990s. We contribute to this literature by updating the convergence analyses to include the most recent period (1994-2003). Four methods (beta and sigma convergence, Markov chain and kernel density analyses) are used to ask whether provincial income disparities have increased or decreased since the mid 1990s. We find that the income disparity among the Chinese provinces has become wider between 1994 and 2003, which suggests stratification of income disparities. We also investigate the link between income disparities and export growth over the period 1994 – 2003 and find that export is an important determinant of provincial economic growth but contributes to the growing income disparity between coastal and inland provinces, given that there is little “trickle-down” effect from exportoriented (coastal) provinces to the poorer, interior provinces.