Explaining Spatial Convergence of China's Industrial Productivity*

Abstract

AbstractThis article investigates the conditions that may auger a reversal of China's increasingly unequal levels of regional industrial productivity during China's first two decades of economic reform. Using international and Chinese firm and industry data over the period 1995–2004, we estimate a productivity growth–technology gap reaction function. We find that as China's coastal industry has closed the technology gap with the international frontier, labour productivity growth in the coastal region has begun to slow in relation to the interior. This may serve as an early indicator of China's initial movement towards reversing growth in spatial income inequality.