Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2008:15:
Why is Chinese Regional Output Diverging?

Joakim Westerlund (), David Edgerton () and Sonja Opper ()

Abstract: In a recent paper Pedroni and Yao (2006) present strong evidence suggesting that Chinese regional output is diverging, a result that flies in the face of the current opinion of Chinese policymakers. This paper provides an in-depth analysis of the reasoning behind this finding. Our main result is that divergence does exist, even when new data and more advanced methods of analysis are used. We also find that it has both an idiosyncratic and a common component. Hence, the increased output inequalities observed at the regional level are due to both region-specific disparities and to disparities between clubs of regions.

Keywords: China; Output convergence; Panel unit root tests; Common factor; (follow links to similar papers)

JEL-Codes: C33; O53; R11; (follow links to similar papers)

24 pages, October 29, 2008, Revised December 3, 2008

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This paper is published as:
Westerlund, Joakim, David Edgerton and Sonja Opper, (2010), 'Why is Chinese Provincial Output Diverging?', Journal of Asian Economics, Vol. 21, pages 333-344

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