Economic Growth and Provincial Market Integration in China

In this paper, using Chinese provincial sector data, I examine the market integration between provinces in China both in wages and different prices of commodity. I use the beta convergence, sigma convergence and the correlation coefficient to determine the degree of market integration and analyze how the wages and prices have differed over time for the period 1986 to 2011. The results indicate that the wage levels have in general diverged, suggesting that there is an increasing difference between the diverging wages in the urban and rural areas, which in long run is contributing to the growing inequality in China. The results for the prices are however showing strong evidence for continuing high or rising levels of market integration