An empirical analysis on industrial structural transition and regional inequality in China

Since reform and opening in 1978, China's economy had made a great development, but the regional inequality decreased in 1980's while increased in 1990's. The change of regional inequality has became as the important issue step by step which affect on the development of economy and the stability of society in China. So, this study attempts to analyze the dynamic relationship between the change of industrial structure and the regional inequality based on the conditional convergence model developed by Barro and Sala-i-Martin. According to analyze the macroeconomic data from 1978 to 2005, we find that there is no convergence of economic growth in the whole process of China's reform. But if we divide this term into two periods, we will find that before 1990, the economic growth of China is convergence. However, after 1990, the divergence exists in the course of economic growth of China. Moreover, we get to know from our study result that the change of industrial structure increases regional economic growth. Hence, we get to know that promoting the development of reform, realizing industrialization and urbanization, and allocating productive factors based on comparative advantage would have a great benefit to the harmonious development of region of China.