IDEAS home Printed from https://ideas.repec.org/a/kap/iecepo/v12y2015i2p257-280.html
   My bibliography  Save this article

The impact of financial development on the upgrading of China’s export technical sophistication

Author

Listed:
  • Yuan Fang
  • Guoda Gu
  • Hongyi Li

Abstract

By building an endogenous technological progress model with intermediate product expansion, the paper shows the evolvement of export technical sophistication (or technical complexity) upgrading in China. We find that financial development, human capital, technological gap, and FDI technology spillover can promote export technical sophistication. In our empirical study, we extend the model of Hausmann, et al. (J Econ Growth 12:1–25, 2007 ) to test the model implications. To be specific, in order to avoid pseudo-statistical phenomenon we eliminate the impact of the technical sophistication measurement exerted by the processing trade-oriented import products. A panel data covering 31 provinces and municipalities in China from 2002 to 2008 is then analyzed. From the national, regional and industrial levels, we find that financial development is a very important factor for the upgrading of the export technical sophistication. Further, various financial development indicators all have significant impacts on the industrial export technical sophistication in different regions and different industries. Finally, FDI, R&D investment and human capital also play significant roles in promoting the upgrading of the export technical sophistication. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Yuan Fang & Guoda Gu & Hongyi Li, 2015. "The impact of financial development on the upgrading of China’s export technical sophistication," International Economics and Economic Policy, Springer, vol. 12(2), pages 257-280, June.
    • Handle: RePEc:kap:iecepo:v:12:y:2015:i:2:p:257-280
    DOI: 10.1007/s10368-014-0277-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10368-014-0277-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10368-014-0277-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kletzer, Kenneth & Bardhan, Pranab, 1986. "Credit Markets and Patterns of International Trade," Santa Cruz Department of Economics, Working Paper Series qt1g36f3sd, Department of Economics, UC Santa Cruz.
    2. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    3. Ari Van Assche & Byron Gangnes, 2010. "Electronics production upgrading: is China exceptional?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(5), pages 477-482.
    4. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    5. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters, in: China's Growing Role in World Trade, pages 63-104, National Bureau of Economic Research, Inc.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Beck, Thorsten, 2002. "Financial development and international trade: Is there a link?," Journal of International Economics, Elsevier, vol. 57(1), pages 107-131, June.
    8. Lai, Mingyong & Peng, Shuijun & BAO, Qun, 2006. "Technology spillovers, absorptive capacity and economic growth," China Economic Review, Elsevier, vol. 17(3), pages 300-320.
    9. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
    10. Kletzer, Kenneth & Bardhan, Pranab, 1987. "Credit markets and patterns of international trade," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 57-70, October.
    11. Sanjaya Lall, 2000. "The Technological Structure and Performance of Developing Country Manufactured Exports, 1985-98," Oxford Development Studies, Taylor & Francis Journals, vol. 28(3), pages 337-369.
    12. Svaleryd, Helena & Vlachos, Jonas, 2005. "Financial markets, the pattern of industrial specialization and comparative advantage: Evidence from OECD countries," European Economic Review, Elsevier, vol. 49(1), pages 113-144, January.
    13. XU, Bin & LU, Jiangyong, 2009. "Foreign direct investment, processing trade, and the sophistication of China's exports," China Economic Review, Elsevier, vol. 20(3), pages 425-439, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Faheem Ur Rehman & Ejaz Ahmad & Muhammad Asif Khan & József Popp & Judit Oláh, 2021. "Does Trade Related Sectoral Infrastructure Make Chinese Exports More Sophisticated and Diversified?," Sustainability, MDPI, vol. 13(10), pages 1-21, May.
    2. Désiré Avom & Brice Kamguia & Joseph Pasky Ngameni, 2021. "Does volatility hinder economic complexity?," Economics Bulletin, AccessEcon, vol. 41(3), pages 1187-1202.

    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. Demir, FIrat & Dahi, Omar S., 2011. "Asymmetric effects of financial development on South-South and South-North trade: Panel data evidence from emerging markets," Journal of Development Economics, Elsevier, vol. 94(1), pages 139-149, January.
    2. Roberto Veneziani & Luca Zamparelli & Omar S. Dahi & Firat Demir, 2017. "South–South And North–South Economic Exchanges: Does It Matter Who Is Exchanging What And With Whom?," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1449-1486, December.
    3. Mustafa Caglayan & Omar S. Dahi & Firat Demir, 2013. "Trade Flows, Exchange Rate Uncertainty, and Financial Depth: Evidence from 28 Emerging Countries," Southern Economic Journal, John Wiley & Sons, vol. 79(4), pages 905-927, April.
    4. Iacovone, Leonardo & Ferro, Esteban & Pereira-López, Mariana & Zavacka, Veronika, 2019. "Banking crises and exports: Lessons from the past," Journal of Development Economics, Elsevier, vol. 138(C), pages 192-204.
    5. Jarreau, Joachim & Poncet, Sandra, 2012. "Export sophistication and economic growth: Evidence from China," Journal of Development Economics, Elsevier, vol. 97(2), pages 281-292.
    6. Do, Quy-Toan & Levchenko, Andrei A., 2007. "Comparative advantage, demand for external finance, and financial development," Journal of Financial Economics, Elsevier, vol. 86(3), pages 796-834, December.
    7. Glawe, Linda & Wagner, Helmut, 2020. "China in the middle-income trap?," China Economic Review, Elsevier, vol. 60(C).
    8. Gächter, Martin & Gkrintzalis, Ioannis, 2017. "The finance–trade nexus revisited: Is the global trade slowdown also a financial story?," Economics Letters, Elsevier, vol. 158(C), pages 21-25.
    9. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(2), pages 711-744.
    10. N. R. Ramírez-Rondán & Marco E. Terrones & Andrea Vilchez, 2020. "Does financial sector development affect the growth gains from trade openness?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 475-515, August.
    11. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
    12. Juan Carluccio & Thibault Fally, 2012. "Global Sourcing under Imperfect Capital Markets," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 740-763, August.
    13. Qing Liu & Ruosi Lu & Xiangjun Ma, 2015. "Corruption, Financial Resources and Exports," Review of International Economics, Wiley Blackwell, vol. 23(5), pages 1023-1043, November.
    14. Peter H. Egger & Christian Keuschnigg, 2017. "Access to credit and comparative advantage," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(2), pages 481-505, May.
    15. Muhammad Nadeem Javaid & Pier-Paolo Saviotti, 2013. "Financial System and Technological Catching-up: an Empirical Analysis," Economic Complexity and Evolution, in: Andreas Pyka & Esben Sloth Andersen (ed.), Long Term Economic Development, edition 127, pages 461-483, Springer.
    16. Bosello, Francesco & Eboli, Fabio & Parrado, Ramiro & Nunes, Paulo A.L.D. & Ding, Helen & Rosa, Renato, 2011. "The economic assessment of changes in ecosystem services: an application of the CGE methodology," Conference papers 332065, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    17. Krishna, Pravin & Levchenko, Andrei A. & Ma, Lin & Maloney, William F., 2023. "Growth and risk: A view from international trade," Journal of International Economics, Elsevier, vol. 142(C).
    18. Amissah, Emmanuel & Bougheas, Spiros & Defever, Fabrice & Falvey, Rod, 2021. "Financial system architecture and the patterns of international trade," European Economic Review, Elsevier, vol. 136(C).
    19. repec:zbw:bofitp:2019_007 is not listed on IDEAS
    20. Kalina Manova & Zhiwei Zhang, 2008. "China's exporters and importers: firms, products, and trade partners," Working Paper Series 2008-28, Federal Reserve Bank of San Francisco.
    21. Do, Quy-Toan & Levchenko, Andrei A., 2004. "Trade and financial development," Policy Research Working Paper Series 3347, The World Bank.

    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:kap:iecepo:v:12:y:2015:i:2:p:257-280. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.