Effects of regional development policies on the resolution of income disparity in China

Abstract

Using thirty provincial panel-data from 1949 to 2010 that is separated into four periods, this paper examines the details of major regional development policies in practice by China so far since its foundation, and focuses on the analysis of how those policies influenced the resolution of inequality between regions through Gini coefficient analysis, coefficient of variation analysis and Theil index analysis. The results of income inequality analysis in Mao’s time show that income inequality coefficients are ups and downs. In the age of the reform and open-door policy, the income disparity in the eastern region drastically decreased, which in turn reduced the national income disparity among regions. However, from the 1990s the income convergences among regions in eastern coastal areas began to cease, which resulted in spreading income disparity among the regions all over China. Even though coefficients of income inequality indices have decreased since the mid-2000s, it may take more observation to decide whether such phenomenon is the result of the policy of 'building of a harmonious society' pursued by Hu Jintao.