A reply to Kin Ming

My guess is that in a country with under developed institutional arrangement, regional competition is particularly helpful.  If region A is getting too unreasonable in terms of policy, taxation and corruption, investors can shift to region B instead.  In other words, the regional competition can, to a certain extend, serves as a powerful tool to reduce ‘crazy practices’, including corruption.  In the long run, to strengthen the institutional arrangement (i.e. delineation and enforcement of property rights) is still inevitable.

Wallace

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