The Rule of Law Driven High-Quality Economic Development: Evidence from China

This study examines the role of the rule of law in fostering high-quality economic development in China, using data from 266 cities over the period 2003–2021. We construct a composite index of high-quality economic development through principal component analysis and capture the rule of law with a novel text-based index derived from annual government work reports using natural language processing. The findings reveal that stronger rule of law significantly promotes high-quality economic development, with the effects being particularly pronounced in core cities. Mechanism analysis shows that innovation serves as the primary channel, while entrepreneurship and net firm entry play negligible roles. These results underscore the critical role of the rule of law in advancing high-quality economic development and highlight the importance of strengthening legal institutions, especially in non-core cities, to achieve more balanced regional economic development. JEL Classification: Q10, O31, P37