A Comparative Analysis of the Effect of Economic Development on Regional Income Disparity between Korea and China
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In this study we provide an empirical analysis of the determinants of regional income inequality between Korea and China. Using regional panel data set for 16 provinces of Korea and 30 provinces of China after the financial crisis in 1997, it analyses how macroeconomic variables affect income disparity. Income disparity is calculated by Max/Min value of per capita income, the Gini coefficient, Theil index, and Hoover index etc. The regression results reveals that the long-run relationship among per capita income and international trade, human capital(or urbanization), and regional government expenditure is statistically significant positive effect in both cases of Korea and China. Furthermore, as expected, the results of independent variables on the regional income disparity have some different in the size of estimated coefficients between Korea and China. That is, the effects of human capital on regional income disparity from Korea are larger than that of China, but the effects of government expenditure from China are larger than Korea. In addition, in connection with income disparity, it implies that the balanced development policy among provinces as well as various development policies against small cities are necessary for alleviate regional income disparity because intra-provincial income disparities are more important than inter-provincial disparities.
Abstract
In this study we provide an empirical analysis of the determinants of regional income inequality between Korea and China. Using regional panel data set for 16 provinces of Korea and 30 provinces of China after the financial crisis in 1997, it analyses how macroeconomic variables affect income disparity. Income disparity is calculated by Max/Min value of per capita income, the Gini coefficient, Theil index, and Hoover index etc. The regression results reveals that the long-run relationship among per capita income and international trade, human capital(or urbanization), and regional government expenditure is statistically significant positive effect in both cases of Korea and China. Furthermore, as expected, the results of independent variables on the regional income disparity have some different in the size of estimated coefficients between Korea and China. That is, the effects of human capital on regional income disparity from Korea are larger than that of China, but the effects of government expenditure from China are larger than Korea. In addition, in connection with income disparity, it implies that the balanced development policy among provinces as well as various development policies against small cities are necessary for alleviate regional income disparity because intra-provincial income disparities are more important than inter-provincial disparities.
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