The Power of Culture: Does Diversity Affect the Breakthrough of the Hu Line in China?

Hu line is the dividing line of Chinese population density, geography, culture, and economy. The areas on both sides of the Hu line are in completely different stages of development, and have development modes. Based on the 3D research framework, and using the panel data of 335 cities in China from 2000 to 2013, our study examines the driving factors and the influence mechanism of productivity in the cities on both sides of the HU line. We find that economic growth in low-density areas depends more on increased density and division, while economic growth in high-density areas depends more on decreases in distance and segmentation. In addition, the mechanism test illustrates the heterogeneous growth mechanism on both sides of the HU line. The cultural diversity in low-density areas promotes economic growth by promoting diversified economy; while the cultural identity in high-density areas promotes specialized economy and thus promotes economic growth. Our study provides new empirical evidence for the informal institutional reasons behind the economic development, and also provides a useful reference for the economic development of the multi-ethnic areas in China.