Does Technology Disparities Affect the Regional Income Differences: Based on Chinese Provincial Panel Data

In this paper, we examine China's regional growth patterns and inspect the role of technology in income convergence or divergence within a cross-section of Chinese 30 provinces by means of panel unit root test and variance decomposition. Looking at the per capita GDP of the provinces from 1952 to 2008, we find there is no evidence showing that income convergence. Not only agent of production accumulation but also total factor productivity is the key reason of increasing income gap. At the meantime, the rapid economic growth of China's provincial economies over the reform period is at the price of the increasing interprovincial income inequality, which results from the different productivity growth across the provinces. We suggested that building an integrated market economy in order to facilitate interregional technology diffusion to improve productivity should be on the top of China's economic reform agenda in the next five-year plan.