Abstract
After taking into account the spatial dependence effects in the panel data consisting of all 31 provinces, direct-controlled municipalities, and autonomous regions in China between the years 1998 and 2017, it found significant spatial autocorrelation effects in both traditional absolute and conditional β income convergence models. At the national level, using the spatial econometric models (Spatial Error Model for absolute convergence and Spatial Durbin Model for conditional convergence), the analysis shows that in the past 19 years from 1999 to 2017, there is no absolute β income convergence. However, there is conditional β income convergence after controlling for all growth factors, while the positive effect of fixed asset investment on regional economic growth is significant, and the effect of population growth is significantly negative. The other growth factors such as FDI inflow, export, and higher education enrollment were surprisingly found no statistically significant effects on regional economic growth. From regional level (Spatial Durbin Model and Spatial Lag Model), there is no conditional β income convergence within each four economic regions. Nonetheless, the northeast region showed an income divergence trend, where only the fixed asset investment is positively significant. This study results imply that China should continue to improve fixed asset investment and control population growth to stimulate regional economic growth and income convergence.
Highlights
1.1 BackgroundOver the past 40 years of reform and opening up, the People’s Republic of China (PRC)’s economy has achieved rapid growth that has attracted worldwide attention
In the existing research on the relationship between investment and economic growth, Li (2004) employed the VAR model to conduct a quantitative analysis of the relationship between fixed asset investment and regional economic growth, and the results show that there is only a one-way significant association between investment and economic growth in both the east and the west, indicating that accelerating investment in the west could be the main measure to fuel the economic growth of the west and narrow the regional gap
The results showed that since the expansion of college enrollment, colleges and universities in more than half of the regions have not played a good role in promoting the local economic development
Summary
Over the past 40 years of reform and opening up, the People’s Republic of China (PRC)’s economy has achieved rapid growth that has attracted worldwide attention. Its strong economic growth mainly derived from the surge of productivity growth as a result of the market-oriented reform in 1978 (Hu & Khan, 1997; Malesky & London, 2014). Behind the halo of rapid economic growth, contemporary China's economy is facing many problems (Tao, 2012). Since 2002, China's economy has achieved rapid growth, but at the same time, China's development model has gradually deviated from the traditional East Asian model (Tao, 2012)
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