BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 12/2014:
Financial development and patterns of industrial specialization: Regional evidence from China
Qing He ()
, Chang Xue ()
and Chenqi Zhu ()
Abstract: The paper investigates the influences of financial
development on patterns of industrial specialization across China’s
regions. We find that industrial sectors reliant on access to external
finance are found to concentrate in regions with developed financial
markets. Both foreign direct investment (FDI) and informal financing
channels are shown to play significant roles in shaping patterns of
industrial specialization in China. In contrast, proxies for formal
financial markets, e.g. the banking system and capital markets have few
effects on regional industrial agglomeration. The role of financial
development remains robust to instrumental variable estimation and
controlling for other traditional determinants of regional
specialization.
Keywords: financial development; informal finance; FDI; industrial specialization; (follow links to similar papers)
JEL-Codes: G10; G20; L60; (follow links to similar papers)
36 pages, April 11, 2014
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