Study on Impacting Mechanism of Institutional Quality for Economic Growth of China during Economic Transition Period DOI: http://dx.doi.org/10.18836/2178-0587/ealr.v5n2p220-243
DOI:
https://doi.org/10.18836/2178-0587/ealr.v5n2p220-243Abstract
This paper is an extension of the multi-sectors endogenous growth model including capital based on the model of Aghion and Howitt (1999). It sets the institution, endogenous human capital and technological innovation into a unified analysis framework, and tests the effects of the institution, capital accumulation and technological innovation on long-run economic growth. The results show that long-run economic growth not only depends on the institutional quality and the technical innovation, but also depends on the capital accumulation and household’s preferences. The long-run stable equilibrium of positive growth rate only occur when the institutional quality reaches a certain level, and the improvement of the institutional quality will improve the long-run economic growth rate when the equilibrium existing. In addition, government tax and subsidy policy can also affect the long-run economic growth. This paper aims to provide theoretical support and policy suggestions for the revival of China’s reform.
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