IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Financial Deregulation, Absorptive Capability, Technology Diffusion and Growth: Evidence from Chinese Panel Data

Author Info

Listed author(s):
  • Qichun He

    (CEMA, Central University of Finance and Economics)

  • Meng Sun

    (SEBA, Beijing Normal University)

  • Heng-fu Zou

    (Development Research Group, World Bank)

Abstract

Technological diffusion via FDI is essential for the economic growth of backward economies. However, institutional and policy barriers may slow down technology diffusion. Using a simple theory based on Acemoglu (2009, ch. 18), we predict that there exists an interaction (i.e., a complementary) effect between inward FDI (pool of available world frontier technologies) and financial deregulation (enhancing absorptive capability via lowering institutional and policy barriers) in promoting growth. We test the predictions using the panel data on Chinese provinces during the reform and opening-up period. The Chinese experience is appealing because of the symbiotic financial deregulation and inflow of FDI. We find robust evidence that there is a significant interaction effect between FDI and the level of financial deregulation in promoting economic growth. This furthers our understanding of the reform and opening-up strategy of China.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://down.aefweb.net/WorkingPapers/w560.pdf
Download Restriction: no

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 560.

as
in new window

Length: 30 pages
Date of creation: 2012
Handle: RePEc:cuf:wpaper:560
Contact details of provider: Web page: http://cema.cufe.edu.cn/

More information through EDIRC

Keywords: Absorptive Capability; Gradual Financial Deregulation; Inward FDI; Interaction; Panel Data;

Other versions of this item:

Find related papers by JEL classification:
  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  2. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
  3. Wolfgang Keller & Stephen R. Yeaple, 2009. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 821-831, November.
  4. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  6. Ugo Panizza & Mónica Yañez, 2005. "Why are Latin Americans so unhappy about reforms?," Journal of Applied Economics, Universidad del CEMA, vol. 8, pages 1-29, May.
  7. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
  8. Belem I. Vasquez Galan & Olajide S. Oladipo, 2009. "Have liberalisation and NAFTA had a positive impact on Mexico´s output growth?," Journal of Applied Economics, Universidad del CEMA, vol. 12, pages 159-180, May.
  9. Harrison, Ann E. & McMillan, Margaret S., 2003. "Does direct foreign investment affect domestic credit constraints?," Journal of International Economics, Elsevier, vol. 61(1), pages 73-100, October.
  10. Eduardo Lora & Mauricio Olivera, 2004. "What makes reforms likely: Political economy determinants of reforms in Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 99-135, May.
  11. Peter D. Goldsmith & Thomas L. Sporleder, 1998. "Analyzing Foreign Direct Investment Decisions by Food and everage Firms: An Empirical Model of Transaction Theory," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 46(3), pages 329-346, November.
  12. Magnus Blomström & Robert E. Lipsey & Mario Zejan, 1996. "Is Fixed Investment the Key to Economic Growth?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 269-276.
  13. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," American Economic Review, American Economic Association, vol. 95(2), pages 33-38, May.
  14. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:

  1. He, Qichun & Sun, Meng, 2014. "Does fiscal decentralization promote the inflow of FDI in China?," Economic Modelling, Elsevier, vol. 43(C), pages 361-371.
  2. He, Qichun, 2015. "Fiscal decentralization and environmental pollution: Evidence from Chinese panel data," China Economic Review, Elsevier, vol. 36(C), pages 86-100.
  3. Gunby, Philip & Jin, Yinghua & Robert Reed, W., 2017. "Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis," World Development, Elsevier, vol. 90(C), pages 242-255.
  4. Wu, Mingqin & Chen, Bin, 2016. "Assignment of provincial officials based on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 38(C), pages 60-75.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:cuf:wpaper:560. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.