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Growth path heterogeneity across provincial economies in China: the role of geography versus institutions

  • Guanchun Liu
  • Chien-Chiang LeeEmail author
  • Yuanyuan Liu
Article
  • 3 Downloads

Abstract

This paper investigates whether China’s provincial economies follow the same growth path by adopting a finite mixture model in which provinces are sorted into groups according to the similarity in the conditional distribution of their growth rates. The method is flexible in that it accounts for (i) endogenous classifications other than given priori, (ii) heterogeneous marginal effects of determinants, (iii) the possibility of growth path transformation, and (iv) the roles of geographic location and institutions in the growth path. The results reveal that all provinces do not follow a common growth process, but rather two distinct growth regimes. Particularly, one is dominated by foreign direct investment and financial depth, while the other is dominated by trade openness. The growth process of provinces in the central region evolves around the year 2004 from the former to the latter. More importantly, geography and institutions help sort provinces into groups, and institutions are more predominant.

Keywords

Multiple regimes Finite mixture model Geography–institutions debate Growth path China 

JEL Classification

C33 O11 O47 

Notes

Acknowledgements

We would like to thank Editor and the anonymous referees for their highly constructive comments. Chien-Chiang Lee is grateful to the Ministry of Science and Technology of Taiwan for financial support through Grant MOST 107-2410-H-110-005-MY2.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.School of Public Economics and AdministrationShanghai University of Finance and EconomicsShanghaiPeople’s Republic of China
  2. 2.Department of FinanceNational Sun Yat-sen UniversityKaohsiungTaiwan
  3. 3.School of EconomicsFudan UniversityShanghaiPeople’s Republic of China

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