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The role of institutional quality and human capital for economic growth across Chinese provinces – a dynamic panel data approach

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Abstract

There is an ongoing debate within the economic growth and development literature whether institutions or human capital are more important for economic growth. We add further arguments to this discussion by focusing on a particular country, namely China. China is an interesting case study since it is often regarded as an exception by having achieved miraculous growth for more than three decades despite relatively low institutional quality. We employ a dynamic panel data model to analyze the role of improvements in institutional quality and human capital accumulation for the economic success of a province in China over the period 2003 to 2007. Using system GMM estimation, we find that while growth in human capital fosters economic growth all over China, only coastal provinces record a positive effect of institutional improvements on the growth rate of per capita income.

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... At least that is what China's experience over the past 40 years seems to suggest (see, e.g. Glawe & Wagner, 2019, 2020b. ...
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This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
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The focus of policy reform in developing countries has moved from getting prices right to getting institutions right, and accordingly countries are increasingly being advised to move towards "best-practice" institutions. This paper argues that appropriate institutions for developing countries are instead "second-best" institutions - those that take into account context-specific market and government failures that cannot be removed in short order. Such institutions will often diverge greatly from best practice. The argument is illustrated using examples from four areas: contract enforcement, entrepreneurship, trade openness, and macroeconomic stability.
Institutions, Human Capital and Development
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Acemoglu, D., F. Gallego, and J. A. Robinson. 2014. "Institutions, Human Capital and Development." Annual Review of Economics 6: 875-912. doi:10.1146/annurev-economics-080213-041119.
Distance to Frontier, Selection, and Economic Growth
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Acemoglu, D., P. Aghion, and F. Zilibotti. 2006. "Distance to Frontier, Selection, and Economic Growth." Journal of the European Economic Association 4 (1): 37-74. doi:10.1162/jeea.2006.4.1.37.
NERI INDEX of Marketization of China’s Provinces
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Fan, G., X. Wang, and H. Zhu. 2010. NERI INDEX of Marketization of China's Provinces 2009 Report [In Chinese]. Beijing: Economics Science Press.
Do Institutions Cause Growth?
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Glaeser, E. L., R. La Porta, F. Lopez-de-Silanes, and A. Shleifer. 2004. "Do Institutions Cause Growth?" Journal of Economic Growth 9 (3): 271-303. doi:10.1023/B:JOEG.0000038933.16398.ed.
Speech at the Fudan University's Fanhai School of International Finance
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Hofman, B. 2018. "Reflections on Forty Years of China's Reforms." Speech at the Fudan University's Fanhai School of International Finance, January 2018. pubdocs.worldbank.org/en/ 934911517472447837/Reflections-on-40-years-of-reforms-final.pdf
Analysis on Efficiency of Prefecture-level City Government in 2016
  • T Tang
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Tang, T., and L. Zhu. 2017. "Analysis on Efficiency of Prefecture-level City Government in 2016." Journal of Jiangxi Normal University (Philosophy and Social Sciences Edition) 50 (2): 43-50. (in Chinese).
Understanding and Interpreting Chinese Economic Reforms
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Wu, J. 2005. Understanding and Interpreting Chinese Economic Reforms. Mason, OH: Thomson South-Western.
China Meets the Middle-Income Trap: The Large Potholes in the Road to Catching-up
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The Fundamental Institutions of China’s Reforms and Development
  • C Xu