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Geography, Economic Policy and Regional Development in China

Harvard Institute of Economic Research Paper No. 1950

63 Pages Posted: 10 Oct 2001  

Sylvie Démurger

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute; National Bureau of Economic Research (NBER)

Wing Thye Woo

University of California, Davis - Department of Economics

Shuming Bao

China Data Center

Gene Hsin Chang

University of Toledo

Andrew D. Mellinger

Harvard University - Center for International Development (CID)

Multiple version iconThere are 3 versions of this paper

Date Written: March 2002

Abstract

Many studies of regional disparity in China have focused on the preferential policies received by the coastal provinces. We decomposed the location dummies in provincial growth regressions to obtain estimates of the effects of geography and policy on provincial growth rates in 1996?99. Their respective contributions in percentage points were 2.5 and 3.5 for the province-level metropolises, 0.6 and 2.3 for the northeastern provinces, 2.8 and 2.8 for the coastal provinces, 2.0 and 1.6 for the central provinces, 0 and 1.6 for the northwestern provinces, and 0.1 and 1.8 for the southwestern provinces. Because the so-called preferential policies are largely deregulation policies that have allowed coastal Chinese provinces to integrate into the international economy, it is far superior to reduce regional disparity by extending these deregulation policies to the interior provinces than by re-regulating the coastal provinces. Two additional inhibitions to income convergence are the household registration system, which makes the movement of the rural poor to prosperous areas illegal, and the monopoly state bank system that, because of its bureaucratic nature, disburses most of its funds to its large traditional customers, few of whom are located in the western provinces. Improving infrastructure to overcome geographic barriers is fundamental to increasing western growth, but increasing human capital formation (education and medical care) is also crucial because only it can come up with new better ideas to solve centuries-old problems like unbalanced growth.

Keywords: China's Regional Growth Pattern, Economic Geography, Preferential Policies, China's Western Region Development Strategy

JEL Classification: D300, O180, O530, P250, P520, R110, R120

Suggested Citation

Démurger , Sylvie and Sachs, Jeffrey D. and Woo, Wing Thye and Bao, Shuming and Chang, Gene Hsin and Mellinger, Andrew D., Geography, Economic Policy and Regional Development in China (March 2002). Harvard Institute of Economic Research Paper No. 1950. Available at SSRN: https://ssrn.com/abstract=286672 or http://dx.doi.org/10.2139/ssrn.286672

Sylvie Démurger

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France
(33 4) 72 86 61 05 (Phone)
(33 4) 72 86 60 90 (Fax)

HOME PAGE: http://www.gate.cnrs.fr/spip.php?article22

Jeffrey D. Sachs

Columbia University - Columbia Earth Institute ( email )

314 Low Library
535 West 116th Street, MC 4327
New York, NY 10027
United States
212-854-8704 (Phone)
212-854-8702 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Wing Thye Woo (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3035 (Phone)
530-752-9382 (Fax)

HOME PAGE: http://www.econ.ucdavis.edu/faculty/woo/woo.html

Shuming Bao

China Data Center ( email )

330 Packard St
Ann Arbor, MI 48104
United States
734-647-9610 (Phone)
734-763-0335 (Fax)

HOME PAGE: http://chinadatacenter.org

Gene Hsin Chang

University of Toledo ( email )

Department of Economics
Toledo, OH 43606
United States
419-530-4677 (Phone)
419-530-7844 (Fax)

Andrew D. Mellinger

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

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