Abstract

Using a modified gravity model of trade and China’s interprovincial panel data, this chapter shows that the negative effect of distance-related transactions costs on trade tends to rise from 2000 to 2010. After constructing all the 56 ethnic groups into a single, interprovincial similarity index, we cannot find any evidence that supports the view that ethnic links may serve as a factor promoting bilateral trade. However, our estimated coefficients on 37 major ethnic groups suggest that both positive and negative ethnic influences on trade exist in China. Finally, we find that the Tibetan and 12 other ethnic groups tend to contribute to China’s interprovincial integration and that the Dai, the Han, the Kazak, and the Va ethnic groups tend to be responsible for China’s spatial disintegration.

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