Development Strategies and Regional Income Disparities in China*

Abstract

This paper argues that the regional income gap of China is endogenously determined by its long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy's existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms' entry into an industry or choice of technology according to the economy's existing comparative advantages.Since the founding of the People's Republic of China, the government has pushed a CAD strategy, i.e., 'leap forward' strategy that emphasized the development of capitalintensive heavy industries. In most provinces, however, the priority industries under this strategy were inconsistent with the comparative advantage determined by the factor endowments in those provinces. Many enterprises in the priority industries were not viable in competitive markets and required interventions in the markets by the …/.

Regional differences in mainland China after the 1970s economic reform

“…In recent years, regional differences have become increasingly noticeable. As for regional development trends in China, Lin & Liu (2008) carried out a study on the provincial economic gap of mainland China with the variation coefficient and Gini coefficient. They showed that the regional gap in mainland China has grown wider since the 1990s.…”

Economic Growth and Infrastructure Investments in Energy and Transportation: A Causality Interpretation of China’s Western Development Strategy

“…To provide a contextual background of our empirical analysis, we first recognize that the WDS was designed to remedy the regional income inequalities documented in the extant literature (e.g., Jian et al, 1996;Wu, 2001;Grewal and Sun, 2002;Lin and Liu, 2005;Kanbur and Zhang, 2009;Fleisher et al, 2010;Huang and Todd, 2010;Li and Wei, 2010). Further, infrastructure investments gained national policy priority in the 1980s (Jin, 1994).…”