Financial Development and Dual Economic Structure Imbalance: A New Perspective from Factor Allocation

Abstract

Abstract: Using a simple theoretical model, this paper illustrates the efficiency and quantity effects of financial development on dual economic structure imbalance, and explores their relationships using provincial data over 2000-2014 in China. The results show that, there is a “U-shape” relationship between overall financial development and dual economic structure imbalance, mostly occurring in the central and western regions. Considering the fact that most provinces lie on the curve's left side, financial depth is conductive to release dual economic structure imbalance. Moreover, since the quantity effect dominants in banks and the efficiency effect neutralizes the quantity effect in financial markets, banking sector has a positive role, while no significant impacts of financial markets are proved.

Key words: financial development, dual economic structure imbalance, factor allocation, U-shape relationship

Yang Zheng, Liu Guanchun, Liu Fang. Financial Development and Dual Economic Structure Imbalance: A New Perspective from Factor Allocation[J]. Management Review, 2020, 32(11): 48-65.

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