Factor Endowment, Institutional Constraints and Regional Economic Development Potential—Empirical Analysis Based on the Perspective of New Structural Economics

Abstract

The new structural economic theory holds that the factor endowment structure has an important relationship with economic development, but a country must be accompanied by institutional constraints in the process of industrial upgrading and economic restructuring. Therefore, this paper divides the factors affecting China's regional economic development into two parts: factor endowment and institutional constraint. By constructing a panel stochastic frontier model, this paper explores the impact of factor endowment and institutional factors on China's regional economic development. The empirical results show that: (1) China's economy cannot exert its maximum development potential in the presence of institutional constraints, and foreign direct investment, infrastructure construction, marketization and foreign trade can alleviate the inherent constraints of China's current economic development to a certain extent. (2) There are great differences in the economic development patterns among the eastern, central and western regions. The western regions depend on government expenditure to some extent, while the eastern regions pay more attention to the role of foreign trade in promoting economic development.