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Opening-up or institutional development? Evidence from China

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  • Yu Chen

Abstract

'Trade fundamentalists' and 'institutionalists' disagree about whether openness or institutions are more important for economic growth. This paper would like to propose a new perspective: openness and institutional development interact with each other. The materialization of the effects of openness on economic growth depends on the existence of adequate institutions, and in the other way around openness may speed up institutional development in the direction of becoming more growth-enhancing. We analyze China's opening-up and institutional development in the past two decades to illustrate the interaction. We then empirically test for the interactions between openness and institutional development, using a panel of Chinese provinces over the past two decades. The results are positive.

Suggested Citation

  • Yu Chen, 2008. "Opening-up or institutional development? Evidence from China," International Economic Journal, Taylor & Francis Journals, vol. 22(4), pages 419-430.
    • Handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:419-430
    DOI: 10.1080/10168730802497387
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    References listed on IDEAS

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