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Reexamining the income inequality in China: Evidence from sequential panel selection method

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  • Liu, Wen-Chi

Abstract

This study aims to understand whether incomes across different regions in China are converging or diverging. We propose a novel approach to panel unit root testing–sequential panel selection method (SPSM) by using panel Kapetanios et al. (KSS) test with a Fourier function, which is sufficiently efficient to control for structural breaks and nonlinearity as well as cross-sectional dependency. SPSM classifies the whole panel into a group of stationary and nonstationary series. The method also clearly determines how many and which series in the panel are stationary processes. Using the panel data obtained from 31 regions in China, we find out that the real gross domestic product per capita from 1979 to 2010 does not converge in 20 of the 31 regions in China. The evidence of income divergence has important policy implications for China.

Suggested Citation

  • Liu, Wen-Chi, 2013. "Reexamining the income inequality in China: Evidence from sequential panel selection method," Economic Modelling, Elsevier, vol. 31(C), pages 37-42.
    • Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:37-42
    DOI: 10.1016/j.econmod.2012.11.048
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    Cited by:

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    2. Ceyhun Can Ozcan & Ahmet Sahbaz & Ugur Ad?guzel & Saban Nazlioglu, 2014. "The Nature of Shocks to Turkish exchange rates: what panel approach says?," Proceedings of Economics and Finance Conferences 0401591, International Institute of Social and Economic Sciences.
    3. Wai Choi Lee & Tsun Se Cheong & Yanrui Wu & Jianxin Wu, 2019. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," Asian Economic Papers, MIT Press, vol. 18(2), pages 126-141, Summer.
    4. Adiguzel, Ugur & Sahbaz, Ahmet & Ozcan, Ceyhun Can & Nazlioglu, Saban, 2014. "The behavior of Turkish exchange rates: A panel data perspective," Economic Modelling, Elsevier, vol. 42(C), pages 177-185.

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    More about this item

    Keywords

    Income inequality; Real GDP per capita; Sequential panel selection method; Panel KSS unit root test; Fourier function; Policy Implications; China;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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