The impact of economic openness on common prosperity: Insights from provincial panel data

Yanyan Deng, Chenyu Li, Shuo Wang and Ruoyuan Tang

International Review of Economics & Finance, 2025, vol. 98, issue C

Abstract: This article follows a trend in research about promoting high-quality development through quality-oriented openness in China and explores the impact of economic openness on China's common prosperity. Based on the panel data of China's provinces from 2012 to 2021, this study constructs an evaluation system of economic openness and common prosperity and establishes relevant econometric models to show its mechanism of action. The author uses re-gressions of standardized data on each variable using a double fixed effects model, which is effective in mitigating endogeneity problems and reducing variable bias. The results show that the effect of economic openness on common prosperity was overall positive. However, its ef-fect presented an inverted “U” shape pattern. There is a threshold effect of economic openness to promote common prosperity, which is reflected in the differences in the effects of factors such as openness and regional development level,the developed regions often have more significant positive effects. Moreover, government behavior plays a critical role in the process of promoting common prosperity development by opening-up. Based on these results, this ar-ticle suggests that in order to better promote common prosperity, the government should seize the opportunity of strengthening opening-up, coordinating regional development through opening-up. Underdeveloped regions should prioritize economic development before expand-ing openness, and implement the same opening-up policies only after reaching a certain level of development.

Keywords: Economic openness; Common prosperity; Threshold effects; Inverted “U” shape; Government behavior (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:98:y:2025:i:c:s1059056025000711

DOI: 10.1016/j.iref.2025.103908

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