China's interregional capital mobility: A spatial econometric estimation |
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| Institution: | 1. The College of Economics and Trade, Hunan University, North Campus, Shi Jia Chong, Changsha, Hunan 410079, PR China;2. Center for Economics, Finance and Management Studies, Hunan University, North Campus, Shi Jia Chong, Changsha, Hunan, 410079, PR China;3. Southern Illinois University Carbondale, 1000 Faner Drive, Carbondale, IL62901, United States;1. Department of Marketing and Logistics Management, Chihlee University of Technology, Taiwan;2. Statistical Office, Ministry of the Transportation and Communications, Taiwan;3. Department of Applied Economics, National Chiayi University, Taiwan;1. School of International Trade and Economics, Central University of Finance and Economics, 39 South College Road, Haidian District, Beijing 100081, PR China;2. Department of International Economics & Trade, Nanjing University, 22 Hankou Road, Nanjing, 210093, PR China;1. Hull University Business School, University of Hull, Cottingham Road, Hull, HU6 7RZ, United Kingdom;2. School of Economics, Jiangxi University of Finance and Economics, 169 Shuanggang East Road, Nanchang, 330013, China;1. University of Alaska Anchorage, Department of Economics and Public Policy, Anchorage, AK 99508, United States;2. Purdue University, Department of Agricultural Economics, West Lafayette, IN 47907, United States;3. Center for Agricultural and Rural Development, Zhejiang University, Hangzhou, China |
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| Abstract: | Free interregional mobility of capital refers to the efficiency of resource allocation. Using a general spatial autocorrelation model that extends the traditional Feldstein–Horioka (FH) test, we analyze Chinese provincial data for the periods before and after 1993, and show that the FH coefficients differ to those in the existing literature. During China's period of reform and opening up between 1979 and 1992, the FH coefficient is significantly negative or not statistically significant. However, for the period after 1994, the FH coefficient is significantly higher than that shown in prior studies. This study explains this phenomenon from the perspective of Chinese-style decentralization. The FH test is an indirect method of showing regional capital mobility. Therefore, we need some form of direct measurement. Thus, we use the rate of the proportional change in physical capital stock as a proxy variable to demonstrate capital mobility directly, and use it to analyze various factors affecting Chinese provincial capital mobility. When investigating these factors, and to establish a realistic foundation on which the spatial effects take place, we devise four spatial weight matrices from the perspectives of geographical features and economic characteristics. Lastly, in order to promote regional capital mobility in China, the Chinese central government needs to take urgent measures to change local governments' strong preferences for GDP under the pressure of political promotion. |
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