Assessing Development Strategies of Jiangsu and Taiwan: A Geweke Causality Analysis

Abstract

Among the economies in the Eastern coastal area of mainland China, Jiangsu has stood out in terms of its rapid and sustained economic growth since 2000. The province has done exceptionally well in terms of competitiveness indicators, catching up quickly with the leading Greater China economy of Taiwan. Such convergence has triggered much academic and policy interest in terms of understanding the driving factors that have enabled Jiangsu to catch up with Taiwan. In this context, this paper empirically analyzes the factors that have caused the convergence between the two economies from 2000 to 2011 by employing Geweke Causality analysis. By decomposing and examining the linear feedback between economic growth and vectors of variables capturing investments in infrastructure, human capital, science, technology and innovation activities, this paper confirms the important role played by those factors in the convergence between Jiangsu and Taiwan in recent years.