Institutional Development, Financial Deepening and Economic Growth: Evidence from China

34 Pages Posted: 14 Feb 2017

See all articles by Paul Wachtel

Paul Wachtel

New York University - Stern School of Business

Mingming Zhou

University of Colorado, Colorado Springs - College of Business

Multiple version iconThere are 3 versions of this paper

Date Written: November 10, 2006

Abstract

There have been profound changes in both political and economic institutions in China over the last twenty years. Moreover, the pace of transition has led to variation across the country in the level of development.In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates. The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions. We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates. Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth.

JEL Classification: O16, P14, P16, O53

Suggested Citation

Wachtel, Paul and Zhou, Mingming, Institutional Development, Financial Deepening and Economic Growth: Evidence from China (November 10, 2006). BOFIT Discussion Paper No. 12/2006. Available at SSRN: https://ssrn.com/abstract=2914045

Paul Wachtel

New York University - Stern School of Business ( email )

44 West 4th St.
New York, NY 10012
United States
212-998-4030 (Phone)
212-995-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~pwachtel

Mingming Zhou

University of Colorado, Colorado Springs - College of Business ( email )

1420 Austin Bluffs Parkway
Colorado Springs, CO 80933-7150
United States
1-719-255-5153 (Phone)

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