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Title: On China's provincial capital mobility : empirical estimations over 1970-2006
Other Titles: Zhongguo kua sheng zi ben liu dong shi zheng yan jiu : 1970-2006
中國跨省資本流動實證研究 : 1970-2006
Authors: Jiang, Mingming (姜明明)
Department: Department of Economics and Finance
Degree: Master of Philosophy
Issue Date: 2009
Publisher: City University of Hong Kong
Subjects: Capital market -- China.
Notes: CityU Call Number: HG5782 .J4254 2009
iv, 87 leaves : ill. 30 cm.
Thesis (M.Phil.)--City University of Hong Kong, 2009.
Includes bibliographical references (leaves 60-64)
Type: thesis
Abstract: To examine the time pattern of China’s provincial capital, we adopt the Feldstein-Horioka framework and the permanent-income type framework in this thesis. First, the Feldstein-Horioka framework focuses on the correlation of savings and investment. We estimate the savings-investment association through fixed effects models, random effects models, and time-varying cross-provincial regressions. In particular, we break down the total savings and investment into private components and government components. That allows us to detect the time pattern of private capital mobility, as well as the effects of the government on capital movement. There is strong evidence for improved provincial capital mobility after the mid-1990s, and the government (including the central and local government) is found to facilitate capital flow through inter-governmental transfers during the entire period under study. These findings are robust when using alternatively constructed variables and econometric model specifications. In addition to the Feldstein Horioka framework, we employ the permanent-income type model proposed by Shibata and Shintani (1998), which concentrates on the correlation between consumption and output. We derive the model in our provincial setup and estimate the model using the Generalized Method of Moment (GMM) due to the issue of endogeneity problem. Among different choices of Instrumental Variables (IVs), we find consistent evidence for improved capital mobility after the mid-1990s and a positive role of government in influencing capital movement. Besides, the open-door policy is shown to contribute to the improvement of provincial capital movement. There is evidence for improved capital market integration in coastal regions, but no evidence for it in inland regions.
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