Financial Deregulation, Absorptive Capability, Technology Diffusion and Growth: Evidence from Chinese Panel Data

Qichun He, Meng Sun and Heng-Fu Zou ()
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Meng Sun: SEBA, Beijing Normal University

No 560, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: Technological diffusion via FDI is essential for the economic growth of backward economies. However, institutional and policy barriers may slow down technology diffusion. Using a simple theory based on Acemoglu (2009, ch. 18), we predict that there exists an interaction (i.e., a complementary) effect between inward FDI (pool of available world frontier technologies) and financial deregulation (enhancing absorptive capability via lowering institutional and policy barriers) in promoting growth. We test the predictions using the panel data on Chinese provinces during the reform and opening-up period. The Chinese experience is appealing because of the symbiotic financial deregulation and inflow of FDI. We find robust evidence that there is a significant interaction effect between FDI and the level of financial deregulation in promoting economic growth. This furthers our understanding of the reform and opening-up strategy of China.

Keywords: Absorptive Capability; Gradual Financial Deregulation; Inward FDI; Interaction; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 F43 O11 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012
New Economics Papers: this item is included in nep-dev, nep-fdg and nep-tra
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Related works:
Journal Article: Financial deregulation, absorptive capability, technology diffusion and growth: Evidence from Chinese panel data (2013)
Journal Article: Financial Deregulation, Absorptive Capability, Technology Diffusion and Growth: Evidence from Chinese Panel Data (2013)
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