Political Risk and Economic Development: A Case Study of China

Jingwen Yu and Chunchao Wang

Economic Research-Ekonomska Istraživanja, 2013, vol. 26, issue 2, 35-50

Abstract: The political instability affects the investment especially the foreign investment which has a close relationship with economic development. This paper investigates the mechanism of the economic influence of political risk through a case of China. The synthetic control methodwill be used to deal with the problem caused by the counterfactual analysis in the case study. The intense situation of the cross-Taiwan Strait relation has great influence on the economic development of Fujian province because of the closely geographic features and economic links. The empirical result reveals that there is an economic loss measured by GDP per capitain Fujian province as political risk increases. Furthermore, the mechanism is investigated. The result shows that FDI in Fujian province receives adverse impact correspondingly.

Date: 2013
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DOI: 10.1080/1331677X.2013.11517605

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