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The Deep Determinants of Economic Development in China: A Provincial Perspective

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  • Glawe, Linda
  • Wagner, Helmut

Abstract

There is a significant body of literature arguing that institutional quality is the key for long run economic growth and development. While the majority of these studies are based on cross-country growth regression, in our paper, we focus on the institution-economic growth nexus within a particular country, namely China. China is often regarded as an exception by having achieved miraculous growth for more than three decades despite relatively low institutional quality. Nonetheless, our key findings suggest that at the provincial level, institutional quality played in fact an important role for the economic success of a province in China, even more important than geographical factors and integration. However, when simultaneously examining the relationship between institutions, human capital, and provincial economic development, we find that human capital ``trumps'' everything else; however institutional quality has a highly significant indirect effect on provincial per capita income by improving human capital. We employ instrumental variable estimation techniques to address the endogeneity problems regarding the institutions-development and human capital-development relationship.

Suggested Citation

  • Glawe, Linda & Wagner, Helmut, 2018. "The Deep Determinants of Economic Development in China: A Provincial Perspective," CEAMeS Discussion Paper Series 12/2018, University of Hagen, Center for East Asia Macro-economic Studies (CEAMeS).
  • Handle: RePEc:zbw:ceames:122018
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    1. Wagner, Helmut, 2018. "Structural change, rebalancing, and the danger of a middle-income trap in China," CEAMeS Discussion Paper Series 13/2018, University of Hagen, Center for East Asia Macro-economic Studies (CEAMeS).

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    More about this item

    Keywords

    economic growth and development; deep determinants of economic growth; institutional quality; human capital; the Chinese economy;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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