Reform, Interaction of Policies, and Economic Growth: Evidence from China¡¯s Provincial Panel Data

Zhao Chen (), Ming Lu () and Ji Yan ()
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Zhao Chen: China Center for Economic Studies, Fudan University, Shanghai 200433, PRC
Ming Lu: Department of Economics, Employment and Social Security Research Center, and China Center for Economic Studies, Fudan University, PRC
Ji Yan: Department of Economics, Washington University, 205 Eliot Hall, Campus Box 1208, St. Louis, MO 63130-4899, USA

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2006, vol. 1, issue 1, 48-68

Abstract: Based on provincial panel data, we tested the effects of openness, denationalization, fiscal reform, and their interactions on Chinese regional economic growth. We found the following: (1) Openness, especially the growth of foreign-direct-investment/gross-domesticproduct ratio, has been important in enhancing China s growth since the mid-1980s, while this effect is not so significant in western China. (2) Fiscal reform is another significant factor for economic growth. If local governments deregulate, higher growth will be obtained. In particular, reducing extrabudget expenditure helps push economic growth, especially in western China. (3) The interaction of economic policies, such as openness, denationalization, and fiscal reform, also plays an essential role in local economic growth. Both for the whole nation and for the eastern area, denationalization does not affect growth independently but expands the effects of deregulation. (4) After controlling economic policies and their interactions, conditional convergence exists. (5) With other factors controlled, eastern China achieved higher growth, while the middle and western areas did not differ significantly in growth. (6)Western China, where policy variables have lower explanatory power for growth, has a growth pattern different from those of the eastern and middle areas.

Keywords: openness; denationalization; fiscal reform; growth; panel data (search for similar items in EconPapers)
JEL-codes: F43 (search for similar items in EconPapers)
Date: 2006
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