Stochastic regional convergence in China: the role of regional clusters in a nonlinear perspective (1952–2007)

Abstract

This paper investigates the notion of stochastic convergence behaviour across the Chinese provinces. Unlike previous works, the present paper takes into account the economic geography by examining the regional clusters and the significant transformation of the Chinese economy through the introduction of structural breaks and nonlinearities in the model. Results indicate that the regional clusters are relevant to the convergence behaviour across China, when both the administrative division and the regional clusters are considered. However, the number of provinces that are converging is higher in the latter case. When nonlinearities were considered across the regional clusters, we found that 18 provinces have already converged with their cluster, 3 provinces are catching up and 10 regions show divergence. These findings are useful for the design and development of national and regional economic policies in the Chinese economy.