Financial Development and Patterns of Industrial Specialization: Evidence from China

Qing He (), Chang Xue and Chenqi Zhu

Review of Finance, 2017, vol. 21, issue 4, 1593-1638

Abstract: This article investigates the influence of financial development on patterns of industrial specialization across China’s regions. We find that industrial sectors reliant on access to external finance tend to concentrate in regions with well-developed financial markets. Both foreign direct investment (FDI) and alternative financing channels are shown to play significant roles in shaping patterns of industrial specialization in China. In contrast, proxies for formal financial markets, for example, the banking system and capital markets, have few effects on regional industrial agglomeration. This result remains robust to instrumental variable estimation, alternative model specifications, and controlling for other traditional determinants of regional specialization.

Keywords: Financial development; Alternative finance; FDI; Industrial specialization (search for similar items in EconPapers)
JEL-codes: G10 G20 L60 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (21)

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