Working Paper: CEPR ID: DP4310
Authors: Wolfgang Keller; Carol Shiue
Abstract: How much of China?s recent economic performance can be attributed to market-oriented reforms introduced in the last two decades? A long-run perspective may be important for understanding the process of economic development occurring today. This Paper compares the integration of rice markets in China today and 270 years ago. In the 18th century, transport technology was non-mechanized, but markets were close to being free markets. We distinguish local harvest and weather from aggregate sources of price variation in a historical sample and in a similarly constructed contemporary sample. Findings indicate the degree of market integration in the 1720s is a very good predictor of per capita income in the 1990s. Moreover, the current pattern of interregional income in China is strongly linked to persistent geographic factors that were already apparent several centuries ago, well before the enactment of modern reform programmes.
Keywords: China; Convergence; Distance; Divergence; Economic Reforms; Geography; Growth; Risk-sharing; Trade
JEL Codes: F15; N70; O10; O40; P30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market integration in the 1720s (N23) | per capita income in the 1990s (D31) |
| aggregate price shocks in the late 20th century (E30) | local price movements (P22) |
| local factors in the early 18th century (N93) | local price movements (P22) |
| market integration in the 1720s (N23) | market integration for distances up to 700 kilometers in the early 18th century (N73) |