Openness and Regional Growth in China

Abstract

In the study of this chapter we empirically investigate the relationship between regional openness and regional labor productivity growth across 29 Chinese provinces over the period of 1982–2010. We also examine whether there exists conditional convergence in labor productivity across the provinces. To tackle these issues, we apply a variety of dynamic panel data estimations under the general theoretical framework of the Solow growth model. Our regression results in this study show that regional openness has a significantly positive and large effect on regional labor productivity growth. In addition, when regional openness is controlled for in our regressions, we find substantially faster conditional convergence in labor productivity across the 29 Chinese provinces over the period of 1982–2010, than when regional openness is left uncontrolled for. As a byproduct, this study also attempts to estimate the likely values of the structural parameters of the aggregate production function in the case of the Chinese regions. In sum, the major findings of this study lend strong support to the claim that openness promotes growth of labor productivity in China. (The analyses contained in this and the preceding chapter extend, update and complement one prior work of the author’s own, which was published as Jiang Y (2012) An empirical study of openness and convergence in labor productivity in the Chinese provinces. Econ Change Restruct 45(4):317–336. In effect, the study in this chapter also serves as a robustness check of the empirical results obtained from the aforementioned prior work of the author’s, Jiang (Econ Change Restruct 45(4):317–336, 2012))