The spatial-temporal hierarchy of regional inequality of China

Abstract

Introduction China has been experiencing a gradual transition from a command economy to a market economy, and has achieved tremendous economic growth in the last three decades. At the same time, the uneven process of economic development among regions has also been intensified. Regional inequality has become a serious issue attracting considerable attention from both the government and researchers. Regional inequality is an important issue of government policies (Wei, 2002). The Chinese government’s regional policies and strategies have been changing in order to effect economic transition and social development. Since the government launched the open-door policy in 1978, China has maintained a comparative advantage and an open-door policy that focus on growth of the coastal regions to attract foreign investment and stimulate economic growth. To further the economic reform, in 1992 Deng Xiaoping, the leader of China, proposed ‘‘socialist marketization’’ and advocated establishing various types of enterprises besides state-owned enterprises. In the last decade, due to the increasing economic gap among regions, the Chinese government has paid more attention to solving economic polarization and endorsing programs to alleviate inequality. For example, in 1999, the ‘‘Western Development Program’’ (xibu da kaifa) was launched to boost the economic development of 12 provincial-level units (hereafter provinces) in the poorer western region. In 2003, Premier Wen Jiabao proposed ‘‘Reviving Northeastern Region’’ (zhenxing dongbei) as a national policy. The pattern of regional inequalities in China has been changing with these polices at different periods. Therefore, it is necessary to examine the time dimension for analyzing China’s regional inequality. Regional inequality has always been a hot research area of geographers and economists. In recent years, the geographical aspect of development has become a mainstream concern, because differences in economic development are always associated with location (Krugman,1999); the geographical scale is very important in regional inequality analysis (Wei, 2002;Wei & Fan, 2000;Wei & Ye, 2009). Some scholars have investigated the spatial patterns of China’s economic development (e.g., Fan rd Foundation (10851022) and the NSF of China (70621001). x: þ1 801 581 8219. . . All rights reserved. Y. Li, Y.H.D. Wei / Applied Geography 30 (2010) 303–316 304 & Sun, 2008;Wei,1998, 2002; Yu &Wei, 2003) and attempted to develop newexplanations for regional inequality by studying spatial autocorrelation (e.g., Wei & Ye, 2004; Yu, 2006; Yu & Wei, 2008). However, the spatial-temporal hierarchy of regional inequality has been rarely studied, and the relevant importance of the factors underlying regional inequality is still unclear. This paper analyzes the evolving patterns of regional inequality in China from 1978 to 2007, with an emphasis on the hierarchy of underlying factors and the time dimensionwithmultilevel modeling. The next section outlines the literature and analytic framework of this research, followed by a discussion of data and methodology. Thenwe examine the pattern and the spatial hierarchy of China’s regional inequality. Finally we conclude with major findings. Literature review and analytic framework Theories of regional inequality are mainly dealing with three problems: namely, the question whether regional equality increases or decreases over time, the causes of inequality, and the development strategy for reducing regional inequality (Lipshitz, 1992). Since the 1950s, there has been a heated debate between the convergence and divergence schools. The neoclassical theory and inverted-U models are widely known representations of the convergence school of thought. The neoclassical growth theory emphasizes equilibrium conditions and the importance of the market in allocating resources, and considers regional inequality as a transitory phenomenon and an inevitable stage for the final equilibrium. Similarly, the inverted-U theory maintains that regional inequality increases during the early stages of development and decreases as the economy matures (Alonso, 1980; Friedmann, 1966; Hirschman, 1958; Williamson, 1965). Scholars such as Perroux and Hirschman advocate government intervention and promote the development of growth poles. This idea is also known as topdown development, or development from above (Wei & Ye, 2009). However, the persistence of poverty and regional inequality in the 1970s prompted the development of alternative schools emphasizing divergence and cumulative causation. The radical political economy perspective, for example, views regional inequality as inevitable under a capitalist system (Smith, 1984), which is pessimistic about the policy effects of regional inequality. During the 1990s, Barro and Sala-I-Martin (1991, 1992) provided a new explanation on convergence which has renewed the discussion on regional inequality. The b-convergence indicates the trend that poorer regions grow more rapidly than wealthier regions, while the absolute difference may not necessarily decline over a period of time. Such a neoclassical approach emphasizing convergence has once again been criticized and challenged (e.g., Silva, 2007; Venables, 2005). Krugman’s (1991) new economic geography, for example, emphasizes geographic (locational) factors and integrates traditional location theories and economic geography into this approach. However, these theories de-emphasize such important factors as institutional effect, spatial scale, spatial hierarchy, and the time dimension (Wei & Ye, 2009). These theories were also developed primarily to explain regional development in Western capitalist countries. Though these theories have influenced the policies and research on China’s regional inequality, they have limited power in explaining regional inequality in China, which is under the transition to a socialist market economy. Stemming from the above Western theories, the literature on China’s regional inequality have displayed their own characteristics and proposed some new analytical frameworks (e.g., Wei, 2002; Wei & Ye, 2009; Yang & Liang, 1994). First, scholars have developed new explanations and proposed new processes that are responsible for regional inequality. Wei (2002),Wei (1999) proposed themulti-scale andmulti-mechanism frameworks and argued that China’s economic reform can be better understood as a triple process of decentralization, marketization, and globalization; and regional inequality in China is sensitive to geographical scale and is influenced bymultiple mechanisms. Researchers have investigated the effects of fiscal decentralization (e.g., Kanbur & Zhang, 2005; Tsui & Wang, 2008; Wei, 1996), foreign investment (e.g., Fu, 2007; Kanbur & Zhang, 2005), policy bias (e.g., Ho & Li, 2008; Lu & Wang, 2002), labor mobility (e.g., Ying, 2003), and globalization of science and technology (e.g., Lu &Wei, 2007; Segal, 2008; Sun &Wang, 2005). Second, some research has examined the efforts of the central government to develop interior China. For example, Fan and Sun (2008) presented an opposing argument that the Chinese government’s programs and efforts since the late 1990s to reduce regional inequality have had some initial success; interregional and intraregional inequalities first became stable and then declined. Third, more vigorous methodological contributions have been produced in this field. Using visualization, spatial regression, and geographicallyweighted regression (GWR) geographers, Wei and his associates in particular, have demonstrated that regional inequality in China is sensitive to geographical clustering and agglomeration (e.g., Wei & Ye, 2009; Ye & Wei, 2005; Ying, 2003; Yu & Wei, 2003, 2008). Yu (2006) and Yu and Wei (2008) further presented spatial-temporal analysis based on spatial panel data, which better represented the dynamics of China’s regional development. The above theories and methodologies have beenwidely utilized in various study cases to highlight policy implications of regional development. For example, Jones and Wild (1997) examine the regional differentiation and spatial variability of Germanywith GIS, and recognize the regional polarities between agglomeration cores and rural residuals after the unification of East Germany and West Germany in 1990. Their empirical results indicate the importance of reconstructing the economic culture of eastern Germany and incorporating sub-regional differentiation into a new framework of regional policy. Yao and Zhang (2001) propose a productionmodel based on an augmented Solowgrowthmodel, and show that the regional economy in contemporary China has become more divergent in the reform period. They suggest that, the current policies focusing on the western region cannot effectively boost economic development in the remote western provinces due to the distance effects and adverse production environment. More recently, scholars have further explored the impacts of regional differentiation on sustainable development in England with GIS spatial analysis (Hube, Owen, & Cinderby, 2007) and in Massachusetts, USA with GWR (Ogneva-Himmelberger, Pearsall, & Rakshit, 2009). They argue that because of the interactive Fig. 1. Three regions and provincial-level units in China. Y. Li, Y.H.D. Wei / Applied Geography 30 (2010) 303–316 305 relationship between socio-economic inequality and environmental protection, the relevant policy intervention would be better developed by considering both socio-economic and environmental conditions. Based on the above review, three areas deserve more research efforts. First, the scale nature of regional inequality should be further studied (Wei, 2007;Wei & Ye, 2009). Although there has been extensive research on the causes andmechanisms of the rising inequality in China, little is known about the relative importance of these contributing factors. Second, the spatial hierarchy of regional inequality has not been thoroughly examined, and a single-level investigation might hide some important characteristics of regional inequality. The application of the multilevel modeling in regional inequality is very limited. Third, government policies keep changing in the reform era, and consequently the influence of the time dimension on regional inequality should be examined. The objectives of this research are to map the shifts in patterns of regional inequality at different geographic scales in China since 1978, to explore the spatial hierarchy of the mechanisms, and to examine the influence of underlining factors. This paper maintains that regional inequality in China is sensitive to spatial scale, and that multi-mechanisms of regional inequality have a spatial-temporal hierarchical structure, which influences the patterns of regional inequality. This research is conducted under the framework of multi-scale, multilevel, and multi-mechanisms. Multi-scale There are 31 provincial administrative units (hereafter provinces) in China. These provinces are traditionally grouped into three regions: eastern, central, andwestern (Fig.1). The ‘‘three economic belts’’ scheme is based on the Seventh Five-Year Plan (1986–1990) and is commonly used to analyze regional inequality in China (e.g., Fan & Sun, 2008; Lee, 2000; Wei, 2002; Yu & Wei, 2003). The eastern coastal region has benefitted from the preferential policies of the Chinese government and from its greater accessibility to foreign trading partners. The central interior region is the origin of China’s culture, politics, and agricultural economy, and, therefore, is highly populated. The less-developed western mountain region is sparsely populated but has rich natural resources. This research examines the patterns of regional inequality at three different geographic scales: inter-province, between all provinces; inter-region, between the three regions; and intra-region, between the provinces of each region. FDI Per Capita Regional Growth (Constant GDP Per Capita) Decentralization Marketization Globalization Coastal Dummy, New Policy Dummy Share of State-own Enterprises, Education Level Fig. 2. Triple transitions of China’s regional development. Y. Li, Y.H.D. Wei / Applied Geography 30 (2010) 303–316 306 Multi-mechanism China’s economic growth can be described by the triple transitions of decentralization, marketization, and globalization, which have introduced a new set of institutional and market forces (Wei, 1999; Wei & Fan, 2000) (Fig. 2). He, Wei, and Xie (2008) have further defined these transitions and analyzed their effects on geographical concentration. Regional decentralization from the central to local governments reflects the institutional change, not only triggering interregional competition for business, but also pushing local governments to implement successful development policies (Montinola, Qian, & Weingast, 1995). Conversely, marketization and globalization create the conditions of comparative advantage and agglomeration economies. The economic reform has stimulated foreign investment and exports; however, the preferential policies are unevenly practiced in some selected areas, especially the coastal region. Therefore, the market force has changed the dominant role of state-owned enterprises, and advocated the competition between firms with various ownership forms, for example private and joint-venture enterprises. The globalization process has further enhanced the comparative advantage due to geographical concentration. This research chooses specific indicators for each transition, which will be discussed in detail later. Multilevel Each of the three economic belts in China has unique geographical, historical, economic, and cultural characteristics. China’s administrative divisions and policy-making have a spatial hierarchical structure. The economic policies have been conveyed through multiple levels of government, including province, prefecture-level city, county, township and village. The current literature has not effectively identified the spatial hierarchy of both economic growth and the underlying mechanisms, and, therefore, is unable to capture the relative importance of these mechanisms, including the characteristics of regional inequality. This research explains the process of economic growth at three levels (Fig. 3). Due to the change of China’s economic policies after reform, and the important role of regional inequality, the time level is selected as the first level. There is no regional government established for the coastal, central and western regions, but different economic policies have been carried out in these regions due to their variety in policy, geography, and history. Therefore, the regional level is the second level. Province level, the third level, is identified to examine the uniqueness of each province. Time Region Province 1990 Eastern Central Western Provinces Provinces Provinces 1995 200

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@inproceedings{LiTheSH, title={The spatial-temporal hierarchy of regional inequality of China}, author={Yingru Li and Dennis Wei} }