The Relationship between Income and GDP in Urban China: A Tier-Based Regression Analysis

Abstract

Over the past few decades, China's rapid economic growth has been accompanied by widening regional disparities, with first-tier provinces benefiting from advanced industrial structures and international trade, while many lower-tier regions have lagged. This study investigates the efficiency of converting per capita income into GDP across Chinese provinces across different tiers of Chinese provinces using linear regressions. The analysis quantifies “income-to-GDP transformation efficiency” by comparing the slope coefficients. The results shown regional differences: high-tier provinces such as Guangdong and Jiangsu indicate strong transformation efficiency, lower-tier provinces like Gansu and Hainan show the opposite. Income inequality acted as a key factor, causing the low coefficients, with more equitable regions achieving higher multiplier effects, leading to a higher GDP growth. Therefore, polices to reduce inequality are vital. A policy case study of Shanghai’s consumption voucher program illustrates how targeted fiscal interventions boost short-term transformation efficiency, contributing to a significant rise in GDP. Limitations include the restricted availability of time-series data for certain provinces, suggesting that quarterly datasets would improve precision in future research.