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The Financial Deepening-Productivity Nexus in China: 1987-2001

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  • Zhang, Jun
  • Wan, Guanghua
  • Jin, Yu

Abstract

The financial intermediation-growth nexus is a widely studied topic in the literature of development economics. Deepening financial intermediation may promote economic growth by mobilizing more investments, and lifting returns to financial resources, which raises productivity. Relying on provincial panel data from China, this paper attempts to examine if regional productivity growth is accounted for by the deepening process of financial development. Towards this end, an appropriate measurement of financial depth is constructed and then included as a determinant of productivity growth. It finds that a significant and positive nexus exists between financial deepening and productivity growth. Given the divergent pattern of financial deepening between coastal and inland provinces, this finding also helps explain the rising regional disparity in China.

Suggested Citation

  • Zhang, Jun & Wan, Guanghua & Jin, Yu, 2007. "The Financial Deepening-Productivity Nexus in China: 1987-2001," WIDER Working Paper Series 008, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2007-08
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    References listed on IDEAS

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    1. Era Dabla-Norris, 2005. "Issues in Intergovernmental Fiscal Relations in China," IMF Working Papers 05/30, International Monetary Fund.
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    Cited by:

    1. Didier, Tatiana & Schmukler, Sergio L., 2013. "The financing and growth of firms in China and India: Evidence from capital markets," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 111-137.
    2. Zhang, Jun, 2008. "China?s Economic Growth: Trajectories and Evolving Institutions," WIDER Working Paper Series 033, World Institute for Development Economic Research (UNU-WIDER).
    3. Iftekhar Hasan & Haizhi Wang & Mingming Zhou, 2009. "Do better institutions improve bank efficiency? Evidence from a transitional economy," Managerial Finance, Emerald Group Publishing, vol. 35(2), pages 107-127, January.

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    Keywords

    growth; financial development; productivity; China;

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