Has China's Interregional Capital Mobility Been Low? A Spatial Econometric Estimation of the Feldstein-Horioka Equation

Yoshihiro Hashiguchi and Kuang-hui Chen

MPRA Paper from University Library of Munich, Germany

Abstract: We conducted a Feldstein-Horioka test for the degree of China's inter-provincial capital mobility each year from 1978 to 2007 using the spatial error model (SEM), a model of spatial econometrics considering spatial dependence, and a data set reflecting revision of historical national and provincial accounts after China's first economic census in 2004. We found that the likelihood ratio test rejected the null of no spatial error correlation, or the appropriateness of the standard OLS model (OLSM), for 17 out of 30 years and that the Akaike information criterion selected the SEM over the OLSM for 20 years. Our estimations demonstrate that the mobility was high until the late 80's, fell to a bottom in the mid-90's, recovered, peaked in the early 2000's, and has weakened recently, even though it has been argued that mobility has been low since 1978 reform, leaving the impression that it has consistently been low.

Keywords: fiscal and financial reform; Feldstein-Horioka paradox; spatial econometrics (search for similar items in EconPapers)
JEL-codes: C21 O16 P21 (search for similar items in EconPapers)
Date: 2010-08
New Economics Papers: this item is included in nep-geo and nep-tra
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Citations: View citations in EconPapers (3)

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