Why Does Capital Fail to Flow from Developed Regions to Backward Regions?--An Analysis of China's Business Environment and Financial Agglomeration

Financial agglomeration, which is caused by the movement and accumulation of capital, has been a matter of concern for economists. Utilizing the recent overhaul of China's business environment as a case in point, the aim of this study is to examine the effect of institutional surroundings on financial agglomeration. The study found that there is a positive correlation between the business environment and financial agglomeration. Moreover, adjusting for endogeneity bias through the utilization of instrumental variables, the conclusion remains robust. Meanwhile, it also provides a novel insight into the concept of the "Lucas Paradox"