Convergence effect of the Belt and Road Initiative on income disparity: evidence from China

Abstract

AbstractThe international economic effects of the Belt and Road Initiative (BRI) have received much attention, but few studies have focused on the impact of the BRI on domestic regional income disparities. Here, a theoretical framework is proposed based on the logic of public policy analysis in economic geography aiming at studying the impact of the BRI on the convergence of inter-city income disparities in China. Specifically, taking the BRI as a quasi-natural experiment, the impact of the BRI on the convergence of inter-city income disparities in 26 provinces of China is studied empirically using the difference-in-differences method. We find that the BRI has indeed contributed to the convergence of regional income disparities, and this convergence effect is continuously dynamic in its nature. The effects of trade opening and industrial structure transformation are the paths through which the BRI contributes to the convergence of income disparities. Furthermore, we find that there is significant heterogeneity in the effects of the BRI on the convergence of income disparities among cities in different provinces in China. The convergence effect of the BRI on the income disparities among cities in East China is small and insignificant, whereas it can significantly reduce the income disparities among cities in Central and West China. The research in this article has important application value for exploration of the regional income distribution effect of the BRI.