Theoretical and Empirical Models of Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

        In this research the secondary data is used based on the time series in which the data have collected on the base of annual time series from 1996 to 2017 with an aim to evaluate the China’s institutional framework and their impact on the national development. In this research the data is collected about the Gross Domestic Product, Labor, and Gross fixed Capital Formation and most of the data is acquire from the World Development Indicators. Furthermore, the Worldwide Governance Indicators is used as a source to collect data about the various institutional indicators.

Variables of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

        In this research, the dependent variable is GDP. Following this some other economic growth’s traditional determinants are take as the control variables which are based on the growth theories (Cobb Douglas production function). As a proxy of Capital, the GCF i.e. Gross Fixed Capital Formation is also used a control variable. Moreover, by considering the phenomena that great investment has positive impact on the growth rate therefore, positive coefficient is expected (Mankiw et al., 1992). Moreover, the labor is also discussed as an important variable in this research by covering the workforce ages 15 or more in the specific period. In the labor the people that are currently working are aimed to discuss. Moreover, in labor we are also including those people who are unemployed and looking for jobs. However, the family workers, the students and unpaid workers are not count in the category of labor. It is discussed in this research because seasonal workers come and go on the base of the season therefore the labor force vary at different time of the year. Subsequently, Labor is discussed as it is a considerable indicator of economic development.

        Moreover, the six indicators to measure governance defined by the Work Bank are also used in this research to measure the quality of the institutions. These indicators are used on the base of the survey that are organized from important institutions of the country such as consulting firms for investment, think tanks, government & non-governmental organizations, multinational agencies, military agencies, and other financial institutions. The six indicators for measuring governance are; Voice and accountability (VOA), political stability (POS), rule of law (RUL), regulatory quality (REQ), government effectiveness (GOE), and Corruption Control (COC). Following this, to create a better understanding about the quality of the institutions, this research is aimed to use Kaufmann’s defined six indicators Kaufmann et al., (2005). The value fo the indicators varies from -2.5 to 2.5 from lower to higher quality of the institutions.

        In this research, the  WGI which is also called the World Governance Indicator has said that control of corruption shows that what extent government is effectively utilizing its power to ensure accountability and transparency in the country. In this aspect, the grand and the petty forms of corruption are addressed and at the same time, the private interests of the state are also discuss. Moreover, the indicator of government effectiveness helps to understand that how effectively, the government is using its public services and bureaucracy to do things in better way. It also includes the development and the implementation of the government’s policies and at what extent the policies introduced by the government are effective in bringing up development to the country in perspective of economy, health, education, etc. The Rule of Law shows the control of the government within the country that describes the government’s power and its rule in maintain peace and to ensure the deliverance of rights to the people living in the country.

Hypothesis of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

H₀: Institutional framework does not cause development positively and significantly in China.

H₁: Institutional framework cause development positively and significantly in China.

Research Design of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

Relationship between Variables of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

        By addressing the relationship of multiple variables, it is aimed to measure that at what extent the institutional factor plays its role in the development of the country. However, at first look, it might look that an institution does not show considerable impact in short term but in other case, in long-term aspect, it might have serious impact on the development of the country. The institutional fact might not appear directly but it may have indirect impact by influencing some other detriments of the development. Following this, there is more complexity in the high quality investment because they produce results in long terms therefore, there is need to carefully address their impact on the development. Moreover, in measuring the impact of institutional development it is possible that an institution has negative impact on some determinents of the development but on the other hand it has positive impact. In this regards, to understand the institutional impact, the overall impact of the institution the will be consider in a specific period (Aron, 2000).

References of  Quantitative Analysis of Institutional Framework of China and how it Impacts the Development

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Aron, J. (2000). Growth and institutions: A review of the evidence. The World Bank Research Observer

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Kaufman, Daniel and Aart Kraay. 2002. Governance Indicators, Aid Allocation, and the Millenium Challenge Account. Unpublished draft for Discussion, World Bank, Washington, D.C.

Mankiw, N.G., Romer, D., & Weil, D.N. (1992). A contribution to the empirics of economic growth, Quarterly Journal of Economics, 107(2), 408-437

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