Financial Development and the Pattern of Industrial Specialization:Evidence from China

摘要

The paper investigates how financial development can influence the patterns of industrial specialization among Chinese regions.We find that industrial sectors that need more external finance are disproportionately agglomerated in regions with more developed financial market.Moreover,we find that both foreign direct investment (FDI) and informal financing channels play a dominant role in shaping the patterns of industrial specialization in China.Proxies for formal financial markets,e.g.banking system and capital market,in contrast,have few effects on regional industrial agglomeration.Our results on the role of financial development remain robust to the use of instrumental variable estimation and to control for other traditional determinants of regional specialization.