On regional inequality and diverging clubs: A case study of contemporary China

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.((C) 2001 Academic Press.