New evidence on the role of regional clusters and convergence in China (1952–2008)

• Published in: China economic review 2012-12, Vol.23 (4), p.1120-1133
• Main Authors: Herrerias, M.J., Ordoñez, J.
• Format: Article
• Language: English
• Subjects: Chinese regions; Club convergence; Endogenous unit root test
• ISSN: 1043-951X; 1873-7781
• DOI: 10.1016/j.chieco.2012.08.001

A new panel method is applied to the case of Chinese provinces to analyze the existence of club convergence in terms of per capita income, labor productivity, and capital intensity, from 1952 to 2008. The advantage of this approach is that it takes into account the heterogeneity of Chinese regions in a nonlinear time-varying framework, where more attention is paid to the spatial dimension. This time-varying approach outperforms other methods used in the relevant literature for an economy in transition, such as China, that has undergone a significant transformation over the period under consideration. Our results indicate that Chinese regions have converged into clubs. However, it is observed that Heilongjiang is diverging in terms of labor productivity and capital intensity, while Liaoning and Guizhou display similar patterns in terms of labor productivity, and Shanxi and Hebei in terms of capital intensity. These results indicate that specific economic packages need to be implemented in the clusters that were identified, with special attention to those regions that show a divergence behavior, in order to guarantee the sustainability and equality of regional growth. ► A new club convergence test is applied across the Chinese provinces. ► We examine per capita income, labor productivity and capital intensity. ► Our results indicate that Chinese regions have converged into clubs. ► Some provinces still diverge. ► Active economic policies are required.