Centripetal forces in China's Economic Take-Off

Author: Mrs. Anuradha Dayal-Gulati and Mr. Aasim M. Husain

This paper uses provincial time series data from China to empirically investigate two propositions relating to economic development: (i) that economic takeoff is associated with technological transfer through foreign direct investment (FDI); and (ii) that takeoff is accompanied, at least in the short term, by widening income inequality. The results indicate that FDI flows have increased the rate of convergence in per capita incomes across China's provinces. However, the pattern of FDI, which has gone mainly to the relatively wealthy provinces, has caused different provinces to converge to different steady states.

Volume/Issue: Volume 2000 Issue 086

Publication date: May 2000

ISBN: 9781451850871

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Business and Economics , Exports and Imports , Economics- Macroeconomics , Money and Monetary Policy , Public Finance , Agribusiness , WP , China , estimate , GDP , Convergence , integration , growth , inequality , FDI flow , FDI inflow , convergence coefficient , estimation result , growth performance , FDI variable , state enterprise , population estimate , Personal income , Foreign direct investment , Agricultural sector , Bank credit , Europe

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Summary

This paper uses provincial time series data from China to empirically investigate two propositions relating to economic development: (i) that economic takeoff is associated with technological transfer through foreign direct investment (FDI); and (ii) that takeoff is accompanied, at least in the short term, by widening income inequality. The results indicate that FDI flows have increased the rate of convergence in per capita incomes across China’s provinces. However, the pattern of FDI, which has gone mainly to the relatively wealthy provinces, has caused different provinces to converge to different steady states.