The Degree of Marketization and Economic Resilience – Evidence from the Prefecture-Level City Level in China

Abstract

This paper constructs a panel two-way fixed-effects model based on the panel data of 275 cities in China from 2008 to 2018 to investigate the impact of the degree of marketization on economic resilience to help the world resist economic risks. The results show that there is a significant positive U-shaped relationship between the degree of marketization and economic resilience. Based on the data of China's marketization index, this paper finds that when China's degree of marketization is low, constrained by the imperfect construction of the market system, the government relaxes its "helping hand" to the market, which will weaken the economic resilience of the city. With the deepening of the marketization process, the government has deepened its self-revolution and loosened its "grabbing hand" on the market, which reduces the systemic transaction costs of enterprises, stimulates the vitality of enterprises, and strengthens the resilience of the city's economy. Therefore, the degree of marketization inhibits and then promotes economic resilience. In addition, the article provides practical suggestions on how to further promote the process of marketization and a better combination of "promising government" and "effective markets".