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2016 | OriginalPaper | Buchkapitel

4. Globalization and Regional Income Inequality in China

verfasst von : Zhao Chen, Ming Lu

Erschienen in: Toward Balanced Growth with Economic Agglomeration

Verlag: Springer Berlin Heidelberg

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Abstract

China’s recent accession to the WTO is expected to accelerate its integration into the world economy, which aggravates concerns over the impact of globalization on the already rising inter-region income inequality in China. This chapter discusses China’s globalization process and estimates an income generating function, incorporating trade and FDI variables.

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Vorheriges Kapitel How Should China Maintain Growth While Balancing Regional Development

Nächstes Kapitel Economic Opening and Domestic Market Integration

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The concept of globalization has many dimensions, ranging from interdependence of economic activities in different countries to flows of ideas across national borders. In this paper, we focus on economic globalization through exchanges of goods and services, and flows of foreign capital. Flows of labor, information, ideology, culture and living styles are not considered as relevant data are unavailable or incomplete. To be more precise, we use openness (trade/GDP ratio) and per capita FDI to represent globalization in this paper.

Unless indicated otherwise, data quoted in this section are all from the National Bureau of Statistics or NBS (various years).

See Table 3 in Démurger et al. (2002) for the timeline of policy initiatives.

Stock market represents another avenue for attracting foreign capital.

We tried to add per capita labor input or household size, but neither of them is significant.

Consistent with most studies, central provinces refer to Shanxi, Guangxi, Inner Mongolia, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei and Hunan, and western provinces include Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang.

Ideally, one should estimate these models for each region or for every year. Due to the limited sample size and also given the flexibility of our functional form, we choose to pool the data for model estimation. As shown later, a re-estimation by GMM under the specification of a dynamic panel data model supports our choice.

IPS is the only unit roots test for panel models that is coded in TSP and Stata.

Caution must be exercised here as the IPS test, as with many other co-integration tests, cannot guarantee co-integration in all units/groups in the panel when the null hypothesis of unit roots is rejected.

An identity, expressing total income as a sum of source incomes, can be thought of as a special income generating function (not an econometric function) with no residual term. In this case, our decomposition can explain 100 per cent of the total inequality.

It is possible, at least hypothetically, that the residuals are all positive for the poor and negative for the rich. In this case, the contribution of the residual term must be negative as it is an equalizing factor.

It can be shown that when R² = 1 or 0, the explained proportion is 100 or 0 %. In the case that CV² is used as the measure of inequality, the explained proportion is always identical to the R².

For this purpose, a Java programme is developed by the World Institute for Development Economics Research of the United Nations University (UNU-WIDER). This programme allows decomposition of inequality of a dependent variable into components associated with any number of independent variables and under any functional form. Readers interested in the Shapley procedure should consult Shorrocks (1999) for technical details and Wan and Zhou (2005) for an intuitive explanation.

One of the referees suggested confirming this conclusion by running a regression of inequality on a set of regressors. This useful suggestion was not taken up because we can only have a total of fifteen observations on regional inequality (one for each year) for this kind of regression. Even with five or six explanatory variables, the degrees of freedom would drop below ten. Such a model is rather unreliable. More importantly, our decomposition results are sufficient for gauging the impact of globalization on regional inequality in China.

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Titel: Globalization and Regional Income Inequality in China
verfasst von: Zhao Chen
Ming Lu
Verlag: Springer Berlin Heidelberg
Buch: Toward Balanced Growth with Economic Agglomeration
Print ISBN: 978-3-662-47411-2

Electronic ISBN: 978-3-662-47412-9

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-3-662-47412-9_4

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