Working Paper: NBER ID: w28794
Authors: Ross Levine; Chen Lin; Chicheng Ma; Yuchen Xu
Abstract: We assemble new data on the British and French concessions in Shanghai between 1845 and 1936 to assess the legal origins view of financial development. During this period, two regime changes altered the degree to which the British common and French civil law traditions held jurisdiction over the respective concessions: the 1869 formation of the Mixed Courts strengthened Western legal jurisdiction, while the 1926 rendition agreement returned those courts to Chinese control. By examining the changing application of different legal traditions to adjacent neighborhoods within the same city, we address identification challenges associated with cross-country studies. Consistent with the legal origins view, the financial development advantage in the British concession widened after the formation of the Courts and shrank after their rendition.
Keywords: Legal Origins; Financial Development; Shanghai Concessions
JEL Codes: G21; K4; N25; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| British common law (K15) | Financial development (O16) |
| Establishment of mixed courts in 1869 (K40) | Comparative advantage in financial development for the British concession (N23) |
| Return of jurisdiction to Chinese control in 1926 (P30) | Diminished financial development advantage of the British concession (N13) |
| Return of jurisdiction to Chinese control in 1926 (P30) | Decline in bank and stock company density in the British concession (N13) |
| Return of jurisdiction to Chinese control in 1926 (P30) | Significant drop in stock returns in the British concession (N24) |