Has China's Interregional Capital Mobility Been Low? A Spatial Econometric Estimation of the Feldstein-Horioka Equation
AbstractWe conducted a Feldstein-Horioka test for the degree of China's inter-provincial capital mobility each year from 1978 to 2007 using the spatial error model (SEM), a model of spatial econometrics considering spatial dependence, and a data set reflecting revision of historical national and provincial accounts after China's first economic census in 2004. We found that the likelihood ratio test rejected the null of no spatial error correlation, or the appropriateness of the standard OLS model (OLSM), for 17 out of 30 years and that the Akaike information criterion selected the SEM over the OLSM for 20 years. Our estimations demonstrate that the mobility was high until the late 80's, fell to a bottom in the mid-90's, recovered, peaked in the early 2000's, and has weakened recently, even though it has been argued that mobility has been low since 1978 reform, leaving the impression that it has consistently been low.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24595.
Date of creation: Aug 2010
Date of revision:
fiscal and financial reform; Feldstein-Horioka paradox; spatial econometrics;
Find related papers by JEL classification:
- P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
- NEP-GEO-2010-09-03 (Economic Geography)
- NEP-TRA-2010-09-03 (Transition Economics)
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