Regional income inequality and economic growth in China

Using an augmented Solow growth model with cross section and panel data, we find evidence of conditional convergence of per capita production across China's provinces from 1978 to 1993. Convergence is conditional on physical investment share, employment growth, human-capital investment, foreign direct investment and coastal location. We project that, in the near term, overall regional inequality as measured by the coefficient of variation is likely to decline modestly but that the coast/noncoast income differential is likely to increase somewhat. We evaluate alternative policies to reduce the coast-noncoast income differential and conclude focusing solely on investment by rural collectives is insufficient. (C) 1996 Academic Press, Inc.