Abstract
This paper compares China’s labor productivity growth across different regions and industries, and investigates how the initial productivity gaps with the international frontier affect their subsequent productivity growth. Using data aggregated from the firm level, the research yields overwhelming empirical evidence that during the period of 1995-2004 China has experienced a rapid convergence in productivity growth across regions: the interior regions that are farther away from international frontier have grown much faster than the coastal region that is closer to the productivity frontier. Such growth patterns offer China a rare opportunity simultaneously to improve income inequality while maintaining a high overall growth rate.
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