The impact of financial development on the upgrading of China’s export technical sophistication / Yuan Fang, Guoda Gu, Hongyi Li.

By building an endogenous technological progress model with intermediate product expansion, the paper shows the evolvement of export technical sophistication (or technical complexity) upgrading in China. We find that financial development, human capital, technological gap, and FDI technology spillover can promote export technical sophistication. In our empirical study, we extend the model of Hausmann, et al. (J Econ Growth 12:1–25, 2007) to test the model implications. To be specific, in order to avoid pseudo-statistical phenomenon we eliminate the impact of the technical sophistication measurement exerted by the processing trade-oriented import products. A panel data covering 31 provinces and municipalities in China from 2002 to 2008 is then analyzed. From the national, regional and industrial levels, we find that financial development is a very important factor for the upgrading of the export technical sophistication. Further, various financial development indicators all have significant impacts on the industrial export technical sophistication in different regions and different industries. Finally, FDI, R&D investment and human capital also play significant roles in promoting the upgrading of the export technical sophistication.

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