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Financial development and patterns of industrial specialization: Regional evidence from China

Qing He, Chang Xue and Chenqi Zhu

No 12/2014, BOFIT Discussion Papers from Bank of Finland, Institute for Economies in Transition

Abstract: The paper investigates the influences of financial development on patterns of industrial specialization across China's regions. We find that industrial sectors reliant on access to external finance are found to concentrate in regions with developed financial markets. Both foreign direct investment (FDI) and informal financing channels are shown to play significant roles in shaping patterns of industrial specialization in China. In contrast, proxies for formal financial markets, e.g. the banking system and capital markets have few effects on regional industrial agglomeration. The role of financial development remains robust to instrumental variable estimation and controlling for other traditional determinants of regional specialization. Keywords: financial development, informal finance, FDI, industrial specialization JEL: G10, G20, L60

JEL-codes: G10 G20 L60 (search for similar items in EconPapers)
Date: 2014-04-14
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