Abstract
The literature on regional disparities in China is both broad and deep. Nonetheless, much of its focus has been on the effects of trade liberalization and national policies toward investment in interior provinces. Few pieces have examined whether the disparities might simply be due to differences in industry mix, final demand, or even interregional trade. Using two newly published multiregional input-output tables and disaggregated employment data, we decompose change in labor productivity growth for seven regions of China between 1987 and 1997 into five partial effects—changes in value added coefficients, direct labor requirements, aggregate production mix, interregional trade, and final demand. Subsequently we summarize the contributions to labor productivity of the different factors at the regional level. In this way, we present a new perspective on recent causes of China’s interregional disparity in GDP per capita.
Highlights
As GDP has soared, interregional income disparity has become a major policy challenge in China due to increasing concerns about social stability (Démurger, 2001)
4 We found that Inner Mongolia comprised 23.5 percent of the Northwest’s GDP in 1997 and 8 percent of North China’s GNI in 1987
When we look at the factors by region, it can be inferred that the high labor productivity growth in North China, East China, and South China derives largely from large decreases in the use of labor per unit of gross output
Summary
As GDP has soared, interregional income disparity has become a major policy challenge in China due to increasing concerns about social stability (Démurger, 2001). Literature investigating the causes of interregional disparity in China has cited many possibilities Those cited have included differences in infrastructure development like transportation and telecommunications networks (Démurger, 2001); the source, size and sectoral allocation of fixed investment (Wei, 2000); the speed in the adoption of new technology; level of human capital stock (Liu and Li 2006); the accessibility of foreign direct investment and international trade (Sun and Parikh, 2001; Wei and Wu, 2001); labor market distortions like the Hukou system, which impedes labor mobility from rural to urban areas (Cai, Wang, and Du, 2002); and province-specific public policy strategies (Lin and Liu, 2008; Kanbur and Zhang, 2005; Démurger et al, 2002a,b; Yang, 2002).
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