Economic Growth and Regional Income Inequality: The Case of Asian Economies

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This research examines regional income inequalities in the East Asian countries. Empirical studies on the convergence hypothesis have mushroomed since the mid-1980s. The convergence hypothesis proposes that poor countries tend to catch up with rich ones in terms of the level of per capita income. Many empirical studies examine the hypothesis using cross-country data and find support for it, although they generally add the qualifier "conditional" before "convergence." Conditional convergence means that poor countries tend to catch up with rich ones in terms of the level of per capita income as long as they have similar economic characteristics, such as the level of human capital.East Asian economies seem to represent good examples of poorer countries catching up with richer countries. Is this phenomenon the same among regions within the countries? If market mechanisms intrinsically function to improve income disparities among spatial units, regional income disparities also ought to disappear. Since regions within a country have characteristics more similar than those of different countries we should not add the qualifier "conditional" before convergence. There are, however, quite few studies on regional convergence in East Asian economies.Major results of the analysis are as follows. First, only Korea (1988-1996) shows thd tendency of regional convergence. The other period for Korea and other countries show no convergence at all. Second, disparity between the capital region and other regions in every country persists, except in Korea for 1988-1996.The above points provide important evidence against the convergence hypothesis. These results suggest that market mechanisms do not intrinsically function to improve income disparities among spatial units.