The Study On The Difference Of Regional Economic Convergence Based On Financial Development

Since the1990s, Economic Growth Convergence has become one ofthe hottest topics in Economic Growth Theory. The core is to investigatethe economic growth difference, among different economies or differentareas within one country, to find the causes of the difference. With thedeepening of economic reforms, China’s market economic system has beenfurther improved, and the Sustainable Economic Growth of Chinabecoming a core problem in China Economic Growth. Meanwhile, afterexperiencing several years of rapid growth, China’s economy entered theslow growth period, and the regional economic also appeared obviousconvergence. Therefore, research the determinants of economicconvergence phenomenon not only contains great theoretical significancebut also of great practical significance. Although there are many researchesand papers for the Chinese regional economic gaps, including someconvergence of factors, but most of them are restricted to the physicalcapital and human capital, rarely involves the financial factors. But now, finance has gradually become the core of modern economy. Financialdeepening and development have constitute one of the most importantaspects in China’s regional economic development. Therefore, the study ofregional financial difference has a significant meaning in the explanation ofthe reasons for regional economic disparities, as well as how to reduce thegaps.This paper, on the basis of previous researches, tends to extend theproposition of the convergence to the financial factors, inspecting themechanism of China’s financial development to the economic convergencecomprehensively, Systematically analyzing the economic growthconvergence mechanism and empirical testing the Chinese provincial databy using the absolutely convergence and conditional convergence. Byanalyzing the two groups of empirical findings of the absolutelyconvergence and conditional convergence, this paper puts forward theinfluence degree of our financial developing on the regional economicgrowth convergence and the different effects of regional financialdeveloping on economic convergence. In the part of theoretical analysis, this paper reviews the relatedcontent on the theory of regional economic convergence and study of therelationship between finance and economic development, and structuringthe empirical model for analyzing of financial development to regionaleconomic convergence, on the basis of β convergence model and AKmodel.In the part of empirical study, this paper first analyzed the presentsituation of China’s regional financial development. Then it introduced thedata and method in detail for empirical test. Then the paper dose empiricalanalysis of the economic convergence effect on financial development, byselecting4respects in all6index measurement of financial assets. Theempirical result shows that: there exist absolute convergence characteristics,in both nationwide and three large areas. And the convergence speed in theeastern regions is significantly higher than the other two regions. From thefinancial asset point of view, the effect of the financial assets on theregional economic convergence is much more obvious in the present stageof China, in the condition of the convergence is faster than that of excluding financial factors of indirect financing, and belongs to thefinancial assets on the convergence of the effect is greater than the directfinancing. From the space view, the role of financial assets tocentral-western region impacted more than the eastern region.Based on existing research, this paper has the following innovations:First, on the current domestic existing reference literature, most of thecurrent studies are focused on economic convergence effect mechanism ofhuman capital and material capital. However, on the development ofChina’s finance industry and the diversification of financial assets, thispaper from the regional financial assets, further explores the effects of thefinancial factors in the process of regional economic transmission, and alsoopens up a new field for the regional economic transfer study., but theforeign empirical study is related to the United States of America and otherdeveloped countries, not much on the so-called “developing areas",especially in China, where the problem of the regional economyconvergence is becoming prominent, so, the study of this paper has apractical significance. Second, most scholars using the cross-sectional data analysis from the research method, while the assumption condition of thismethod is considered too strict and can not handling the heterogeneity ofthe sample data well. As a result, this paper using the panel data method,settling well with this problem and amending the deviation of convergencerate.