OPENNESS, THE SPATIAL SPILLOVER EFFECT OF PRODUCTIVITY, AND REGIONAL GROWTH OF INLAND PROVINCES IN CHINA

In this study we investigate how openness and the spatial spillover effect of productivity play their roles in affecting economic growth and convergence across China's inland provinces. We set up a model where an inland province achieves productivity growth by taking advantage of productivity spillovers from the world frontier and from coastal provinces. By using a nonlinear least squares regression method in our empirical analysis, we see that provincial openness has a significantly positive effect on provincial productivity growth. In addition, we also see that productivity growth in inland provinces in China is significantly affected by coastal-to-inland spatial spillovers of productivity. As a byproduct, we also estimate the factor share of capital in the aggregate production function, in the case of China's inland provinces.