IDEAS home Printed from https://ideas.repec.org/a/bba/j00010/v2y2023i2p17-35d194.html
   My bibliography  Save this article

How does Financial Development Affect Regional Economic Growth in China? A Mediating Role of Industrial Structure Optimization

Author

Listed:
  • Tao Zhu

    (School of Economics, Henan University, Kaifeng, China)

  • Yu Liu

    (School of Economics, Henan University, Kaifeng, China)

  • Jingru Chen

    (School of Economics, University of Bristol, Bristol, UK)

Abstract

Financial development and industrial structure optimization are two-wheeled engines for promoting high-quality development, but the causal identification of the two is still poorly understood. This paper addresses this research gap by comprehensively analyzing the relationship between them. Regional economic growth is a necessary condition for achieving high-quality development. Taking China as an example, this study empirically examines the role of financial development and industrial structure optimization in high-quality development using the entropy method, fixed effects, mediation effects and instrumental variable regression. The study results show that (i) financial development has actively promoted regional economic growth. (ii) The driving effect on the central and western regions is greater than that on the eastern region. (iii) There are differences in the mediating effect of industrial structure optimization and rationalization between different levels of financial development and economic growth. (iv) In addition, the mediating effect of industrial structure optimization is larger in the eastern region than in the central and western regions. (v) The mediating effect of industrial structure rationalization is not obvious in the eastern region, but has a masking effect in the central and western regions. Our findings provide new strategies for financial development and industrial structure optimization in developing countries.

Suggested Citation

  • Tao Zhu & Yu Liu & Jingru Chen, 2023. "How does Financial Development Affect Regional Economic Growth in China? A Mediating Role of Industrial Structure Optimization," Review of Economic Assessment, Anser Press, vol. 2(2), pages 17-35, August.
    • Handle: RePEc:bba:j00010:v:2:y:2023:i:2:p:17-35:d:194
    as

    Download full text from publisher

    File URL: https://www.anserpress.org/journal/rea/2/2/12/pdf
    Download Restriction: no
    File URL: https://www.anserpress.org/journal/rea/2/2/12
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simeon D. Alder, 2016. "In the Wrong Hands: Complementarities, Resource Allocation, and TFP," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(1), pages 199-241, January.
    2. Sylvain Catherine & Thomas Chaney & Zongbo Huang & David Sraer & David Thesmar, 2022. "Quantifying Reduced‐Form Evidence on Collateral Constraints," Journal of Finance, American Finance Association, vol. 77(4), pages 2143-2181, August.
    3. Julia M. Puaschunder, 2019. "Artificial Intelligence Market Disruption," Proceedings of the 13th International RAIS Conference, June 10-11, 2019 01 JP, Research Association for Interdisciplinary Studies.
    4. Joel M. David & Venky Venkateswaran, 2019. "The Sources of Capital Misallocation," American Economic Review, American Economic Association, vol. 109(7), pages 2531-2567, July.
    5. Trenczek, Jan & Wacker, Konstantin M., 2023. "Human Capital Misallocation and Output per Worker Differences: Beyond Cobb-Douglas," GLO Discussion Paper Series 1331, Global Labor Organization (GLO).
    6. Poschke, Markus, 2013. "The Decision to Become an Entrepreneur and the Firm Size Distribution: A Unifying Framework for Policy Analysis," IZA Discussion Papers 7757, Institute of Labor Economics (IZA).
    7. Carsten Eckel & Florian Unger, 2023. "Credit Constraints, Endogenous Innovations, And Price Setting In International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1715-1747, November.
    8. Alam, M. Jahangir, 2020. "Capital misallocation: Cyclicality and sources," Journal of Economic Dynamics and Control, Elsevier, vol. 112(C).
    9. Chen, Cheng & Senga, Tatsuro & Sun, Chang & Zhang, Hongyong, 2023. "Uncertainty, imperfect information, and expectation formation over the firm’s life cycle," Journal of Monetary Economics, Elsevier, vol. 140(C), pages 60-77.
    10. Daniel A. Dias & Carlos Robalo Marques & Christine Richmond, 2020. "A Tale of Two Sectors: Why is Misallocation Higher in Services than in Manufacturing?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 361-393, June.
    11. Bachas, Pierre & Fattal Jaef, Roberto N. & Jensen, Anders, 2019. "Size-dependent tax enforcement and compliance: Global evidence and aggregate implications," Journal of Development Economics, Elsevier, vol. 140(C), pages 203-222.
    12. James B. Ang & Jakob B. Madsen, 2012. "Risk capital, private credit, and innovative production," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1608-1639, November.
    13. Galina Vereshchagina, 2014. "Serial Entrepreneurship and the Impact of Credit Constraints of Economic Development," 2014 Meeting Papers 1173, Society for Economic Dynamics.
    14. Tiago Cavalcanti & Bruno Martins & Cezar Santos & Joseph Kaboski, 2018. "Dispersion in Financing Costs and Development," 2018 Meeting Papers 426, Society for Economic Dynamics.
    15. Liu, Jiangtao & Zhang, Yi & Kuang, Jia, 2023. "Fintech development and green innovation: Evidence from China," Energy Policy, Elsevier, vol. 183(C).
    16. Alvaro Aguirre, 2017. "Contracting Institutions and Economic Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 192-217, March.
    17. Francisco Buera & Benjamin Moll & Yongseok Shin, 2013. "Well-Intended Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 216-230, January.
    18. Lai, Tat-Kei & Wang, Luhang, 2024. "Spatial disparity of skill premium in China: The role of financial intermediation development," China Economic Review, Elsevier, vol. 85(C).
    19. Cristina Arellano & Yan Bai & Patrick J. Kehoe, 2019. "Financial Frictions and Fluctuations in Volatility," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2049-2103.
    20. Da-Rocha, José-María & Restuccia, Diego & Tavares, Marina Mendes, 2019. "Firing costs, misallocation, and aggregate productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 98(C), pages 60-81.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bba:j00010:v:2:y:2023:i:2:p:17-35:d:194. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ramona Wang (email available below). General contact details of provider: https://www.anserpress.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.