Provincial Income Convergence in China, 1953-1997: a Panel Data Approach

China's accelerated growth rate during the reform period 1978-97 has reinforced concerns about how to cope with continued expansion while also maintaining balanced regional growth. We examine the tendency to, and the speed of, provincial income convergence during the two periods: pre-reform (1953-1977) and reform (1978-1997). The Solow growth model provides the main theoretical framework. The empirical method accounts for heteogeneity in both initial technology and the rate of technological progress. Estimation problems are addressed by using the System GMM Estimator and a coefficient bound provided by the OLS and within group estimator. Although we find evidence of conditional convergence for both the periods, relative to the estimated convergence speed for other regions and countries, China's provincial convergence speeds are surprisingly low: 0.414% for the pre-reform period and 2.23% for the reform period. This means that, despite China's remarkable economic growth, the provincial income converg ence process has been disappointing.