Abstract This paper builds a spatial econometric model by using the provincial level data since the development of the western regions in China. Utilizing Jeffery Wurgler (2000) model which proposed the sector investment elasticity, this paper measures the efficiency of capital allocation and draws a conclusion that the efficiency of stated-owned-capital allocation is the lowest, the efficiency of private-capital allocation is the highest, and the efficiency of FDI-capital allocation is in the middle. But all of them are lower comparing with that in the developed countries. This paper believes that the reform of financial and investment systems is the key to improving the efficiency of the capital allocation.
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Received: 31 December 2009
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