Epidemics, Convergence, and Common Prosperity: Evidence from China

This article investigates the impact of previous epidemics on rural development and convergence, and identifies the impact's mechanism based on convergence tests. Using a balanced panel of 31 provinces, the empirical results from 2002 to 2019 show that epidemics decelerated convergence in rural per capita income. The mechanism analysis shows that the accelerated divergence in wages and the decelerated convergence in business income were the major drivers, which also led to decelerated convergence in rural per capita consumption. Although epidemics have not threatened rural food consumption and the Engel coefficient of rural households, these two indicators of basic living needs have failed to achieve convergence across regions. The overall impact of an epidemic on convergence in rural-urban income disparity has also been insignificant, indicating that epidemics have affected rural and urban development simultaneously. Finally, COVID-19 is likely to decelerate convergence in rural income, rural consumption, and urban income.