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Institutional development, financial deepening and economic growth: Evidence from China

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Author Info
Hasan, Iftekhar () (BOFIT)
Wachtel , Paul (BOFIT)
Zhou, Mingming (BOFIT)
Abstract

There have been profound changes in both political and economic institutions in China over the last twenty years. Moreover, the pace of transition has led to variation across the country in the level of development. In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates. The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions. We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates. Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth.

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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 12/2006.

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Length: 34 pages
Date of creation: 05 Oct 2006
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Handle: RePEc:hhs:bofitp:2006_012

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Related research
Keywords: economic growth institutions financial markets China

Find related papers by JEL classification:
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
P14 - Economic Systems - - Capitalist Systems - - - Property Rights
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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