Analysis Of The Reason For The Regional Economic Disparities In China

The regional economic disparity is becoming more and more serious in contrary to rapid economic growth rate. Though there are a variety of theories advanced by many scholars based on their research from different angles on this issue currently, a widely-recognized theory or consensus has not been achieved so far. As a result, further research and discussion are becoming more necessary.In this paper, we analyze formation, development, changes and reasons of regional economic disparity. Firstly, both domestic and oversea theories and results of research about Chinese regional economic disparity are summarized. Then, we use Clustering Method to classify the 28 provinces of China into 3 species, the development and present situation of regional disparity are investigated from 1978 to 2005 among the 3 species and provinces. The result of analysis of regional economic disparity indicates that it should be classified into two periods: 1978-1986 during which the provincial economic disparity mainly shows the regional economic disparity; and 1987-2005 during which the economic disparity among 3 species mainly shows the regional economic disparity. Furthermore, we examine the relationship between the regional economic disparity and the change of Total Factor Productivity (TFP) of these regions based on the calculation of TFP and the variance Decomposition of the regional income disparity in two periods respectively. The result indicates that the difference of total factor productivity between different regions can explain most of the China's regional economic disparity.