Effect Of Financial Industry On Economic Growth:a Comparative Study On The Cities In Zhejiang Province

This paper works on the effect of financial industry on economic growth and compares the differences of such effect between cities in Zhejiang Province? and also provides policy suggestions on the financial development in Zhejiang Province. According to the previous studies in the fields, this paper constructs several indicators to analyze the financial industry in Zhejiang, and also use the factor analysis method to construct a composite indicator to analyze the financial agglomeration. With a panel data from 1998 to 2012, this paper uses fixed effect model to estimate the effect of financial agglomeration on economic growth in Zhejiang Province.This paper provides several main conclusions. First, financial agglomeration has a large increase from 1998 to 2012 in all cities in Zhejiang. Second, this paper shows that financial agglomeration is positively across with economic growth, while paths are different across cities. Generally speaking, the marginal effect is larger in poorer city. Third, this paper shows that financial agglomeration has a positive effect on economic growth. Forth, the effects of financial agglomeration are different across cities. Generally speaking, the marginal effect is larger in poorer city. This paper contributes to study the effect of financial industry on economic growth on cities’level.