Intercity Income Inequality Growth and Convergence in China

Abstract

In the late 1970s China embarked upon a period of wide-ranging reforms, amongst which the Economic Reforms and the Open Door Policy can be counted. This article is to investigate ensuing patterns and trends in the interCity per-capita income distribution in China in the 1990s, after the reforms had been in place for a decade. The following methodologies are used: inequality and polarization indices, to illustrate basic trends, stochastic dominance techniques, to provide unambiguous economic welfare and poverty comparisons across regions and over time, and transition probability techniques and polarization/ convergence tests, to study the long-run evolution of income distributions for Cities. The results suggest a significant welfare improvement and concomitant reduction in the poor status of Cities for all regions, with strict welfare dominance of the Eastern Coastal Area over the interior. They also indicate a significant convergence trend in the center (especially in the Eastern Coastal Area) together with a divergence trend in both lower and upper tails of interCity income distributions. Economic reform and globalization effects in the coastal area have driven convergence in the central mass; divergence in both tails of the distribution stems from the growing coastal-inland gap due to the unbalanced pace of the economic reform and globalization.