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Is income converging in China?

A flexible Fourier stationary test

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Abstract

This study adopts a flexible Fourier unit-root test proposed by Enders and Lee (2012) to revisit the tendency towards convergence in real per capita income among provinces after economic reform in China. When a data-generating process is non-linear, a Fourier series not only allows for the possibility of an unknown number of structural breaks with unknown forms but also allows for the use of a low-frequency component to capture multiple changes. Contrary to what the linear statistics suggest, our results from a flexible unit-root test indicate that China's eastern and western regions are converging to their own specific steady states.

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