Abstract
The body of literature about institutes’ efficiency is mainly fallen into the field of microeconomics, even though in theory, the efficiency could be related to economic growth. This paper tries to fill this gap by examining empirically the relationship between banking sectors’ efficiency and provincial economic grow in China, while the role of law enforcement is also investigated. We construct a variable which proxies for the efficiency of Chinese banking sector as a whole. When putting it into the classical growth estimation, the results show that there exists strong positive relationship between banking efficiency and Chinese provincial economic growth. In addition, we find that in regions where law enforcement is more effective, the effect of banking system on economic growth is more salient. Keywords-Banking System, Law Enforcement, Economic Growth, Cost Efficiency
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