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Financial Development, Economic Efficiency and Productivity Growth: Evidence from China

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  • Sylviane Guillaumont Jeanneney

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Ping Hua

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Zhicheng Liang

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

Abstract

Financial development may lead to productivity improvement in developing countries. In this paper, based on the Data Envelopment Analysis (DEA) approach, we use the Malmquist index to measure China's total factor productivity change and its two components (i.e., efficiency change and technical progress). We find that China has recorded an increase in total factor productivity from 1993 to 2001, and that productivity growth was mostly attributed to technical progress, rather than to improvement in efficiency. Moreover, using panel data set covering 29 Chinese provinces over the period of 1993-2001 and applying the Generalized-Method-of-Moment system estimation, we investigate the impact of financial development on productivity growth in China. Empirical results show that, during this period, financial development has significantly contributed to China's productivity growth, mainly through its favourable effect on efficiency.

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Paper provided by HAL in its series Working Papers with number halshs-00562630.

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Date of creation: 03 Feb 2011
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Handle: RePEc:hal:wpaper:halshs-00562630

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Keywords: Financial Development; total factor productivity; Chinese Economy;

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References

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Citations

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Cited by:
  1. Moffat, Boitnmelo & Valadkhani, Abbas & Harvie, Charles, 2008. "Identifying productivity change in Botswana’s financial institutions: an application of Malmquist productivity indices," Economics Working Papers, School of Economics, University of Wollongong, NSW, Australia wp08-13, School of Economics, University of Wollongong, NSW, Australia.
  2. Kao, Chiang, 2010. "Malmquist productivity index based on common-weights DEA: The case of Taiwan forests after reorganization," Omega, Elsevier, Elsevier, vol. 38(6), pages 484-491, December.
  3. Ying Xu, 2009. "How does financial system efficiency affect the growth impact of FDI in China?," Asia Pacific Economic Papers, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University 383, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  4. Kyophilavong, Phouphet & Salah Uddin, Gazi & Shahbaz, Muhammad, 2014. "The Nexus Between Financial Development and Economic Growth in Lao PDR," MPRA Paper 57308, University Library of Munich, Germany, revised 14 Jul 2014.
  5. Ying Xu, 2012. "How does financial system efficiency affect the growth impact of FDI in China?: Evidence from provincial data 1999-2006," China Finance Review International, Emerald Group Publishing, Emerald Group Publishing, vol. 2(2), pages 406-428, August.
  6. Phouphet KYOPHILAVONG & Gazi Salah Uddin & Muhammad Shahbaz, 2014. "The Nexus Between Financial Development and Economic Growth in Laos," Working Papers, Department of Research, Ipag Business School 2014-447, Department of Research, Ipag Business School.
  7. Aoife Hanley & Wan-Hsin LIU & Andrea Vaona, 2011. "Financial Development and Innovation in China: Evidence from the Provincial Data," Kiel Working Papers 1673, Kiel Institute for the World Economy.

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