Endogenous Institutions and Economic Growth: Evidence from China

Li Zhao () and Chu Yujing ()
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Li Zhao: Glorious Sun School of Business and Management (GSSBM), DongHua University,Tourism College, Shanghai Normal University, Shanghai, China
Chu Yujing: Glorious Sun School of Business and Management (GSSBM), DongHua University,Tourism College, Shanghai Normal University, Shanghai, China

Financial Sciences. Nauki o Finansach, 2020, vol. 25, issue 1, 54-77

Abstract: The paper examined how economic institutions affect capital accumulation in the private firms sector through the finance sector and the operation objectives of different ownership firms in a socialist market economy with Chinese characteristics, which extended the neo-classical economic growth method. The Author found that economic institutions were the main factors affecting the efficiency of capital allocation between the private sector and the state-owned sector. Compared with the state-owned sector, economic institutions lead private sector to a decrease in loans and government subsidies through finance sector, and to an increase in its production costs. The evidence suggests that private firms make efforts to hire special human capital to improve economic institutions as a substitute for political capital. Considering that the strategy of China’s economic institutions reform was a national promotion which followed after a regional pilot, this paper found that the economic institutions’ reform pilot areas had a more significant impact on economic growth.

Keywords: economic institutions; ownership discrimination; capital allocation; economic growth (search for similar items in EconPapers)
JEL-codes: E13 E60 G32 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:finsci:v:25:y:2020:i:1:p:54-77:n:5

DOI: 10.15611/fins.2020.1.05

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