The Finance–Growth Nexus and Poverty Reduction in Western China

Abstract

In this article, we study the effect of financial development (FD) on economic growth in western China. Special attention is paid to the western region because of the large-scale development strategy in West China. We specify the regression models based on the endogenous growth theory. The empirical results show that (1) FD can promote economic growth mainly through improving TFP; (2) FD is more important than human capital in promoting GDP growth; (3) The effect of FD on TFP growth is significant statistically in all regions, but it is the most significant economically in the western region of China.

KEY WORDS:

• economic growth
• financial development
• regional inequality and poverty reduction
• western economy

Acknowledgments

The authors thank the editor (Ali M. Kutan) and two anonymous referees.

Additional information

Funding

The authors acknowledge the financial support from the Key Research Institutes of Humanities and Social Sciences, Ministry of Education of China (13JJD790025, 14JJD790015), the National Social Science Foundation of China (13&ZD029), and the Key Project of Philosophy and Social Sciences Research, Ministry of Education of China (14JZ011), and the Fundamental Research Funds for the Central Universities(ZK1016).