On Regional Inequality and Diverging Clubs: A Case Study of Contemporary China

Abstract The existence of geo-economic clubs must meet two conditions. First, per capita output within each club converges to a long-term stationary state. Second, per capita output between clubs diverges so that the rich become richer and the poor poorer. This paper proposes a production model to explain club divergence and uses both the unit root test and the decomposition of an inequality index to prove the existence of geo-economic clubs among the Chinese provinces based on real per capita GDP data from 1952 to 1997. The results reflect a serious problem of regional inequality and growth divergence in contemporary China. J. Comp. Econ. , September 2001, 29 (3), pp.466–484. University of Middlesex, London NW4 4BT; and University of Chongqing, China. Copyright 2001 Academic Press. Journal of Economic Literature Classification Numbers: C10, O53.

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