Firm Dynamics, Institutional Context, And Regional Inequality Of Productivity In China

This paper focuses on the issue of regional inequality in China. It seeks to move away from focusing on the relationship between factor accumulation and regional inequality towards an analytical framework that concentrates upon the ways in which regional inequality has articulated with factor productivity and firm dynamics, while acknowledging the role of institutional context. Based on one database on firm‐specific economic and financial variables, this paper measures factor productivity in China's manufacturing industry at the regional level, and decomposes it into various components. Empirical results confirm that regional inequality in terms of productivity have been declining in China. It also demonstrates that regional inequality has been fundamentally shaped by the regional institutional context, particularly in regard to the triple process of decentralization, globalization, and marketization, resulting in an enormous spatial variation of economic and institutional landscapes.