BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 12/2006:
Institutional development, financial deepening and economic growth: Evidence from China
Iftekhar Hasan ()
, Paul Wachtel and Mingming Zhou
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; (follow links to similar papers)
JEL-Codes: O16; O53; P14; P16; (follow links to similar papers)
34 pages, October 5, 2006
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