Long-run relationship between inequality and growth in post-reform China: New evidence from dynamic panel model

In this paper, we employ a panel of 27 Chinese provinces from 1984 to 2012 to estimate an autoregressive distributive lag model and find that there exists a robust positive long-run relationship between income inequality and growth in post-reform China. In addition, our estimation results indicate that physical capital investment, especially private capital investment, is a principal driver of the long-run growth in China, whereas the roles of human capital and public capital investment are largely ambiguous and insignificant. We also discuss the implications from comparing our estimation results with those obtained in another study using U.S. data.