Is Financial Development Another Source of Comparative Advantage? Evidence from China

20 Pages Posted: 27 Apr 2009

See all articles by Qun Bao

Qun Bao

Nankai University

Jiayu Yang

Nankai University

Abstract

Using panel data for 29 provinces in China during 1990-2004, the present paper attempts to explore a possible link between financial development and China's foreign trade. Three measures of comparative advantage in manufactured goods have been applied in our study, including Balassa's revealed comparative advantage, the net manufactured export index, and the Michaely index. We also use four indicators of financial development to identify the different functions of regional financial development, and to determine both size and efficiency features of financial institutions. The estimation results suggest that besides factor endowments, foreign firms and infrastructure, financial development has a quantitatively large and robust effect on China's manufactured goods trade. Therefore, further reform of China's financial system should be encouraged to fully exploit the comparative advantage of China's foreign trade.

Suggested Citation

Bao, Qun and Yang, Jiayu, Is Financial Development Another Source of Comparative Advantage? Evidence from China. China & World Economy, Vol. 17, Issue 2, pp. 15-34, March-April 2009. Available at SSRN: https://ssrn.com/abstract=1375923 or http://dx.doi.org/10.1111/j.1749-124X.2009.01139.x

Qun Bao (Contact Author)

Nankai University ( email )

94 Weijin Road
Tianjin, 300071
China

Jiayu Yang

Nankai University ( email )

94 Weijin Road
Tianjin, 300071
China

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
369
PlumX Metrics