Agricultural and Nonagricultural Growth and Intercounty Inequality in China, 1985-1991

Abstract

tion, rural industry is effective in alleviating rural unemployment and eliminating poverty (Ho, 1986). China's rural industry has seen explosive growth for the past two decades, transforming the social and economic landscape of the countryside (see Findlay, Watson, and Wu, 1994). Prior to the emergence of rural industries, agriculture was the primary source of rural income and its uneven development the main source of regional disparities. When activities other than crop production begin to play an increasingly important role in the rural economy, they also become a new source of regional disparities. This article examines the impact of the burgeoning nonagricultural sector on intercounty disparities in China between 1985 and 1991. Studies of regional income inequality come from two theoretical strands. One strand is the neoclassical economic growth model that predicts convergence of per capita gross domestic product (GDP) or income between initially rich and poor economies to a steady state. Based on the assumption of diminishing returns to capital, the SolowSwan model predicts that economies with a lower capital-labor ratio