Geographic Factors and China's Regional Development Under Market Reforms, 1978-1998

Posted: 10 Sep 2003

See all articles by Shuming Bao

Shuming Bao

China Data Center

Gene Hsin Chang

University of Toledo

Jeffrey D. Sachs

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

Wing Thye Woo

University of California, Davis - Department of Economics

Abstract

This study investigates the geographic effects on regional economic growth in China under market reforms. We develop a model for the regional growth pattern of the Chinese economy during the period, characterized by foreign direct investment (FDI) and mobilization of rural surplus labor. The FDI and labor migration are directed by the differentials in the expected returns from the capital investment and in the wage rate. The differentials are, to a large extent, explained by geographic factors. In the context of market reforms and the open door policy, the spatial and topographic advantages of the coastal provinces are realized. As a result, the returns to the capital investment in the coastal provinces are higher than in the rest of the country, thus attracting more FDI and migrant labor into the region and causing the growth disparity. Our empirical test supports this hypothesis. It finds that geographic factors are statistically significant in explaining the regional disparity in China. This disparity is mainly a coast versus non-coast gap.

Keywords: regional diversity, geography, China

JEL Classification: O18, P2, R11

Suggested Citation

Bao, Shuming and Chang, Gene Hsin and Sachs, Jeffrey D. and Woo, Wing Thye, Geographic Factors and China's Regional Development Under Market Reforms, 1978-1998. Available at SSRN: https://ssrn.com/abstract=440261

Shuming Bao (Contact Author)

China Data Center ( email )

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HOME PAGE: http://chinadatacenter.org

Gene Hsin Chang

University of Toledo ( email )

Department of Economics
Toledo, OH 43606
United States
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Jeffrey D. Sachs

Columbia University - Columbia Earth Institute ( email )

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212-854-8702 (Fax)

National Bureau of Economic Research (NBER)

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Wing Thye Woo

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

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