THE COAST-NONCOAST INCOME GAP, PRODUCTIVITY, AND REGIONAL ECONOMIC-POLICY IN CHINA

We postulate that inferior factor productivity in China's noncoastal p rovinces is a principal reason for their lower economic growth despite high investment rates relative to provincial GDP. We find that total factor productivity is roughly twice as high in the coastal provinces and estimate that investment in higher education and foreign direct in vestment helps explain the productivity gap. We speculate that despite its relatively modest estimated return-investment in infrastructure m ay be necessary to attract foreign direct investment and to retain uni versity graduates in the interior. (C) 1997 Academic Press.