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The Rising Tides That Lift the Boats: Growth through Heterogeneous Convergence in Chinese Provinces

Author

Listed:
  • Kian Ong

    (Nottingham University Business School, University of Nottingham Ningbo China)

  • Kent Matthews

    (Nottingham University Business School, University of Nottingham Ningbo China
    Cardiff University)

  • Baoshun Wang

    (Zhongnan University of Economics & Law)

Abstract

Does China pull up its 31 mainland provinces as it converges to the incomes of advanced economies? The conventional method of modelling convergence in the Chinese provinces has been the Barro approach. This paper models convergence through a common factor, interpreted as the rising tides that lift the boats—the growth of China lifts its provinces. We question the conventional (Barro in Q J Econ 106:407–443 1991) definition of convergence. Imposing a common convergence rate across provinces would bias the convergence rate towards zero. We focus on the heterogeneous model where the convergence rate and long-run elasticity to the common factor differ across provinces. The rising tides of growth disproportionately benefit the poorer provinces and lifts the poor provinces more than the wealthier ones. This reveals the effects of transfer from the coastal provinces that developed first to the inner provinces that developed later.

Suggested Citation

  • Kian Ong & Kent Matthews & Baoshun Wang, 2024. "The Rising Tides That Lift the Boats: Growth through Heterogeneous Convergence in Chinese Provinces," Open Economies Review, Springer, vol. 35(4), pages 751-778, September.
    • Handle: RePEc:kap:openec:v:35:y:2024:i:4:d:10.1007_s11079-024-09755-8
    DOI: 10.1007/s11079-024-09755-8
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    Keywords

    C33; O47;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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