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1、精品论文Regional Economic Di sparity, Financial Disparity, and National Economic Gr owth: Evidence fr om China Jiangang PengBong-soo LeeCollege of FinanceDepartment of Finance, College of BusinessHunan UniversityFlorida State UniversityChangsha, P. R. China 410079Tallahassee, Florida 32306-1110, USApeng
2、jiangangblee2cob.fsu.eduGuanzheng LiJing HeCollege of FinanceCollege of FinanceHunan UniversityHunan UniversityChangsha, P. R. China 410079Changsha, P. R. China 410079AbstractSince China began its economic reform and opening up, the Chinese economy has enjoyed steady economic growth.However, the dis
3、parity in regional economic growth and financial development has become a noticeable characteristic of todays Chinese economy. In the literature on development economics and financial development, it is disputed whether regional economic and financial disparity has any effect on economic growth. In
4、this paper, we examine the dynamic relations among national economic growth, economic disparity, and financial disparity in China. Specifically, we focus on whether economic disparity or financial disparity affects national economic growth. As measures of economic and financial disparity across regi
5、ons and provinces, we use the Williamson coefficient of disparity using both regional data (eastern, central, and western) and provincial data (from 31 provinces). Overall, we find that both provincial financial disparity and, to a lesser degree, economic disparity have a negative effect on national
6、 economic growth. In addition, financial disparity appears to be exogenous, suggesting that financial disparity is not influenced by either economic disparity or national economic growth. Although we find evidence of a non-linear relation between economic development and economic disparity, in parti
7、cular, using provincial data, we do not find evidence of an inverse U-shaped relation between the two. We further examine the implications of these findingsKeywords: regional economic disparity, financial disparity, economic growth, ChinaSince China began its economic reform and opening up, China ha
8、s achieved relatively fast economic growth. Meanwhile, the regional economic disparity became more serious and attracted much attention from media and academics. The eastern coastal region has experienced high economic growth to become an economically developed area, and thus the living standard of
9、the residents in the eastern region has improved substantially as their wealth has increased over time, enabling them to accumulate financial assets. The central and western regions, however, have experienced slower economic growth and have become relatively underdeveloped areas with fewer financial
10、 assets. As a result, the disparity-21-in regional economic growth and financial development has become one of the important characteristics in post-reform China. 1This type of disequilibrium approach to economic development is regarded as one of the successful experiences of Chinas economic reform
11、policy. In this paper, we examine the empirical validity of this disequilibrium policy in China. Specifically, we examine whether regional economic and financial disparity has any significant effect on Chinas economic growth. If it does, the follow-up question is to see whether the effect is positiv
12、e or negative. What are the implications of the results for Chinas economic and financial policy? These are major issues we want to address in this paper.The paper is organized as follows. In Section 1, we provide a brief literature survey. In Section 2, we divide China into eastern, central and wes
13、tern regions and examine their economic and financial development. As a measure of regional economic and financial disparity, we employ the Williamson coefficient. In Section 3, we look at economic and financial development based on 31 provincial (autonomous regions and municipalities included) data
14、. In Section 4, we propose our hypotheses about how economic and financial disparities affect national economic growth. In Section 5, we conduct empirical analyses and report the results. In Section 6, we provide further discussions for empirical results, and we conclude with some policy implication
15、s in Section 7.1Literature review 1. 1 E c on o m i c devel o pment di sp ari t y1 . 1 . 1 Theory o f reg i o na l eco n o m ic disequilibrium French economist Perroux (1950) introduces the growth pole theory based on the relationship between economy and industry. According to the theory, economic g
16、rowth cannot occur simultaneously in all industries but concentrates first in certain industries at different degrees, then spills over through various channels to affect the whole economy. Boudeville (1966) expands this theory from economic space into geographical structure: Economic space contains
17、 not only the structure of economic variables but also a regional relation or geographic structure of economic phenomena. The economic growth of the country starts from the growth pole, then radiates through the growth pole in different ways and affects the whole economy. American economist Hirschma
18、n (1958) introduces the disequilibrium growth theory, which can be seen as supporting Perrouxs growth pole theory.Myrdal (1957) extends Lewiss (1955) industry sectoral dual structure theory into a regional dual structure. According to Myrdal, the disparity in regional economic growth levels causes t
19、he inequality of the economy, which further increases the gap in regional economic growth. With continuous circulation and accumulation, the dual structure appears among regions and countries. In the circulation process, there are two kinds of effects: backwash effect and spread effect. The backwash
20、 effect refers to the inflow of resources from the less developed areas to the developed areas because of the disequilibrium of regional economic growth, which has a negative effect on the economy of the less developed regions. The spread effect, in contrast, is the positive stimulation effect of th
21、e spread of technology, demand, etc. in the developed regions on the less developed regions. American urban planer Friedman (1972) develops a more complete space polarization theory called the Center-Periphery Paradigm describing the space development structure of the developing countries urbanizati
22、on.1 Recently, an article in the Economists mentions the income disparity in China. To quote, “As in any fast-developing economy, for all its successes Chinas breakneck growth masks a multitude of problems, . Meanwhile, three decades of “get rich quick” advice from party central have left the countr
23、y divided between a richer coast and still impoverished interior, between upwardly mobile city dwellers and stagnating rural communities. These days, the income disparity between Chinas richest few and poorest many (peasants, migrant workers, pensioners) would make many a modern capitalist blush Eco
24、nomists, October 11, 2007.1. 1. 2 I n ver s e U - sh ape rel ati o nThere seems no consensus in the literature on whether the regional economic development gap is enlarging or shrinking over time. Kuznets (1955) proposes that the relationship between income inequality and the level of economic devel
25、opment is likely to be inverse U-shaped, with an increasing inequality during the initial takeoff toward a modern economy, giving way to more equality as a country approaches more advanced stages of industrialization. His proposition has been tested and has been largely confirmed by empirical studie
26、s, including Williamsons (1965) study.By analyzing data on regional disparities of 24 countries in the 1950s, Williamson (1965) finds that there was an inverse U-shaped relationship between regional disparity and development phases. Based on the cross-country analysis, he finds that regional dispari
27、ties in developing countries such as Brazil, Columbia, the Philippines and Puerto Rico were growing, while those in developed countries such as the United States, Canada, France and Italy were constantly on the decline. By analyzing the change of regional income disparities in each country over time
28、, he finds that in the early stages of economic development, regional disparity increases, whereas in the late stages, the disparity tends to shrink. Based on these findings, he claims regional disparity follows the inverse U-shaped curve over the countrys economic development.Although some theoreti
29、cal and empirical analyses support the inverse U-shaped distribution of regional disparities over the countrys economic development, as Williamson himself admits, their researches fail to find the reason for the existence of the inverse U-shaped curve. Therefore, people tend to surmise the changing
30、pattern of regional disparities with economic growth as the intrinsic law of a countrys economic development. However, does there exist counteractive inference from regional disparities to economic growth? It seems to be an important issue to take all around the relationship between the disparity an
31、d growth.1. 1. 3 S tu d i e s o n Chi n aMany scholars have done research on the regional economic disparity in China. Chen and Fleisher (1996) analyze Chinas provincial data for the sample period of 1952 - 1993 using the Solow model. They find that the per capita regional product took on a divergin
32、g tendency before the economic reform but turned around to converge between 1978 and 1993. Jian et al. (1996), Wei (1997), Lin and Liu (2003), and Qin (2004) find that the convergence of regional economies in China was time-dependent, with a convergence of regional economic growth between 1978 and 1
33、990 with no convergence after1990. A few scholars discuss the factors affecting Chinas regional economic disparity from various perspectives, including foreign trade and FDI (Wan et al., 2005), element allocation and employmentefficiency (Chen and Xu, 2004), and national monopoly (Hao and Li, 2006).
34、1. 2 Fi n a nci a l de vel o p m ent di sp a r i t y1. 2. 1 Fi n a n c i a l devel o pment t heo ry The relationship between financial development and economic development has been studied theoretically and empirically for a long time. Schumpeter (1912) emphasizes the importance of finance in econom
35、ic development. Based on cross-country comparisons, Goldsmith (1969) finds parallelism between economic and financial developments. McKinnon (1973) and Shaw (1973), the founders of the financial deepening theory, argue that financial development has an effect on economic development and vice versa.S
36、ince then, economists have proposed diverse models and conducted extensive empirical analyses based on the models. Some studies focus on the effects of economic growth on financial development. For example, based on theoretical models, Greenwood and Jovanovic (1990), Greenwood and Smith (1996), and
37、King and Levine (1993) analyze how financial system develops as the economy grows. Other studies focus on the effect of financial development on economic growth, which seems to be the main-stream financial development theory in the 1990s e.g., Greenwood and Jovanovic, 1990; Roubini and Xavier, 1991;
38、 Bencivenga and Smith, 1991; Devereux and Smith, 1994.1. 2. 2 Fi n a n c i a l du al i s m the o r yThe literature on financial disparity is mainly about the financial dualism in under-developed countries. Myint (1964) is the first to point out the financial dualism in under-developed countries. He
39、maintains that to promote industrialization the government should allocate capital and foreign exchange resources, which are limited, to modern industries at an advantage, and to traditional industries under less favorable conditions. Meanwhile, financial dualism results in a capital outflow from tr
40、aditional industries to modern industries, expanding the modern industry with little, or even a negative, effect on traditional industries.Similarly, Shaw (1973) and McKinnon (1973) show that one of the important characteristics of the incompleteness in developing countries is two fragmented financi
41、al markets: the organized financial market with a few modernized and formal financial institutions, and the unorganized financial market with lots of traditional and informal financial activities. The organized financial market located mostly in cities absorbs the idle funds of residents and enterpr
42、ises to provide loans to modern institutions at a relatively low interest rate, enabling the modern institutions to adopt more capital incentive technology. The unorganized financial market, facing mainly traditional sectors including peasants, collects funds from internal funds and a few from indiv
43、idual idle funds. In this market, the borrowers are often poor peasants with great fund demands due to their low income and savings, and thus they have a relatively large capital gap. Because of the fragmentation of the two markets, capital cannot flow effectively.1. 2. 3 S t u d i e s o n Chi n as
44、regi o n a l fi na nci a l di spari t y a nd ec on omi c gr ow th Studies on Chinas regional economic growth from the perspective of financial disparity attracted much attention with the progress in empirical studies on financial development theory in China.Zhou and Zhong (2004) divide China into ea
45、stern, central and western regions and study the causality of the financial development and economic growth in each region. They find that the eastern region has a benign reciprocity relation between a financial intermediarys development and economic growth, whereas the central and western regions d
46、o not show such a benign relation. Ran et al. (2006) examine how the finance and economy relationship differs between the eastern and western regions and find significant differences. In the West, financial development led economic growth in the long run, but without significant short-run causality.
47、 In the East, however, both significant long-term and short-term causality are confirmed. Wang et al. (2007) summarize the features of the regional disequilibrium of Chinas financial asset allocation and analyze the relation between financial resources and economic growth. Their results show that fi
48、nancial development Granger-caused economic growth in central region and at the national level. In the east-north region, economic growth caused financial development, while there is no causality examined in the western region. So, there seems to be no stable and consistent relationship between financial development and economic growth across different regions.As seen above, previous studies show a close relation between Chinas financial development and economic growth in each
