Banking Competition and Entrepreneurial Location Choice:A Perspective from the New Economic Geography
Investigating how financial system regional distribution shapes the spatial economic distribution is of paramount theoretical and practical importance for the New Economic Geography literature and the formulation of regional development policies.By adding a banking sector to the new economic geography model,this paper demonstrates that increased banking competition lowers the loan cost,attracting more firms to enter.This attraction is further strengthened when interregional trade costs are reduced.An empirical study based on data on Chinese banking outlets and the entrepreneurial location choice of registered firms reveals that banking competition significantly promotes entrepreneurial firm entry.The regression results using urban commercial banking reform and small and medium-sized banks'off-site expansion shocks as instrumental variables remain robust.The channels of influence inscribed in the theoretical model are also supported by the empirical study.The paper contributes to understanding of the relationship between financial geographical structure,entrepreneurial location choice and spatial economic distribution.
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