Entrepreneurship, Financial Intermediation And Economic Growth: Theoretical Model And Chinese Experience

Entrepreneurship is not only the engine of innovation but also the key determinant ofeconomic growth. Scholars have in-depth study on the relationship between entrepreneurshipand economic growth, but they have ignored an important fact that whether it is theentrepreneurship or economic growth are inseparable from the support of financialintermediation. This paper studies the relationship of entrepreneurship, financialintermediation and economic growth from a theoretical and empirical point of view and finallygets conclusions.We present an endogenous growth model of entrepreneurship, financial intermediationand economic growth and reveal the links between entrepreneurship and economic growth. Wefind that when considering the financial intermediation, only when the effect ofentrepreneurship move beyond a certain point can a relatively high level of entrepreneur bringabout higher economic growth.On the empirical side, we research the relationship of entrepreneurship, financialintermediation and economic growth through panel data methods in a panel date settingcovering31provinces for the period1999-2010. The results show that: Firstly,entrepreneurship is positively associated with economic growth in every region of China.Secondly, entrepreneurship in promoting economic growth varies by regions. The role ofentrepreneurship on economic growth in relatively underdeveloped areas is more notable thanwhich in relatively developed areas. Thirdly, the development of financial intermediation andeconomic growth in each region of China doesn’t exist a long-term stable relationship.Fourthly, financial intermediation has the same contribution rate to entrepreneurship, and therole of financial intermediation is limited.This paper suggests that the government can promote economic growth throughpromoting the entrepreneurship by policy support and improving the financial system.