Institutional Change And Economic Growth

Economic growth is a necessary prerequisite to improve people’s living standards、promote the prosperity of our country, and it has been the eternal theme of our human society. Since the reform and opening up, China’s rapid economic growth has created a miracle, became the focus of the world attention and also provided material for the study of economics. The rapid growth of China’s economy occurred in a certain institutional environment, thus explaining the phenomenon of Chinese economic growth and analyzing the characteristics of Chinese economy, from the institutional point of view, has an important significance for the future economic development of our country. In the1970s, with the rise of institutional economics, institution began to be concerned by economists gradually, as a scarce element like technology, human capital and knowledge. Since the founding of New China, our country has experienced several major institutional change, and economic growth during different periods also showing different characteristics. This paper reviews institutional changes from the founding of new China to the economic reform and then after the economic reform. After the founding of new china, the economy of our country was in recovery. Economic development can’t adapt to the command system. After Chinese reform and opening up in1978, the construction of socialist modernization began and economic system transferred towards market economy gradually. Socialist economic system established and continued to improve, economy developed rapidly with a higher average annual growth rate, promoted overall economic and social progress effectively. Chinese institution had a great effect on economic growth and promoted the economic development profoundly.The effect of institution is obvious:institution, as a rule, optimized resource allocation coordinated the interests of all resource users, and so has a positive role in promoting economic growth. Classical economists either ignored the impact of institution or saw institution as exogenously given when doing their research. Aiming at the above problems, firstly, this paper constructs mathematical models include institutional factors from different angles:on the one side, we build an endogenous growth model considering institution factor, and then analyze the existence、stability of the equilibrium solution, the optimal economic growth rate, the effect of institutional factors on economy growth path; on the other side, we build the institutional endogenous growth model contains the human capital and then get the critical conditions for positive economic growth. Also we analyze the comparative static impact of various parameters on optimal economic growth. Secondly, we select provincial panel data to study the relationship between institution and economic growth. The institution is multidimensional, so we selected the denationalization rate, opening up and the degree of government intervention on economy as an agent indicator variable of institution to study the institutional effect on economic growth. The results show that:denationalization rate, opening up and the degree of government intervention on economy have positive effect on economy growth. And then, we do empirical study of eastern and western regions respectively to analyze the relationship between institution and economic growth. We try to reveal the differences between eastern and western economic development from the perspective of institutional. Finally, we give some appropriate policy recommendations based on our conclusions.