Jing Tong - The Relative Contributions of Preferential Policies, Geographical Location, and Economic Institutions to the Divergence in Regional Economic Growth in China

This dissertation adds to the literature on regional inequality in China by showing that another important determinant of the inequality is the reform of economic institutions. The fundamental change in economic institutions, especially the development of the non-state sector, has significantly improved China's economic growth performance, albeit its contribution is lower than those of preferential policies and physical location. Two general lessons can be drawn from the experience of the growth of the non-state sector in China. First, the growth of the non-state sector in the inland provinces is a reliable vehicle to reduce regional inequality. Second, the state-owned domestic banks should stop discriminating against the non-state sector and provide it with a truly market-based mode of investment financing.