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

34 Pages Posted: 2 Aug 2006

See all articles by Paul Wachtel

Paul Wachtel

New York University - Stern School of Business

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Mingming Zhou

University of Colorado, Colorado Springs - College of Business

Multiple version iconThere are 3 versions of this paper

Date Written: October 2006

Abstract

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.

Keywords: economic growth, institutions, financial markets, China

JEL Classification: O16, P14, P16, O53

Suggested Citation

Wachtel, Paul and Hasan, Iftekhar and Zhou, Mingming, Institutional Development, Financial Deepening and Economic Growth: Evidence from China (October 2006). BOFIT Discussion Paper No. 12/2006, Available at SSRN: https://ssrn.com/abstract=921624 or http://dx.doi.org/10.2139/ssrn.921624

Paul Wachtel (Contact Author)

New York University - Stern School of Business ( email )

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

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
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Bank of Finland ( email )

P.O. Box 160
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Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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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