Markets in China and Europe on the Eve of the Industrial Revolution

1. Markets in China and Europe on the Eve of the Industrial Revolution Carol H. Shiue Wolfgang Keller

2. 1. Introductions • The paper studies these problems: • 1. Why the first industrial revolution started in England around 1770, not in other relatively advanced regions such as China or continental western Europe? • 2. Whether or not, are institutions the important determinant which causes the modern economic growth after industrial revolution or the effects of the technologic revolution? • 3. As late as the late 18th century, are there many differences in market integration between Qing China and continental western Europe, Yangzi Delta and England? How to take quantitative analyses of these region’s market integration?

3. Previous research on relationship between institutions and modern economic growth: • 1. European allocative institutions are both necessary and sufficient conditions for modern growth( North and Weingast 1989, North 1981, North and Thomas 1973). An outcome of that was that it facilitated the movement of goods across locations and furthered development of industrial expansion. • 2. An alternative view on growth, however, is that these allocative institutions are not necessary and sufficient for modern economic growth. Thus, China may have been as market-oriented as the leading areas in Western Europe, with similarly good institutions of allocative efficiency. Yet it did not experience an industrial revolution in the 18th century, possibly because it lacked, for example, institutions that support technical progress( Mokyr 1990, Landes 1969), which are different from the allocative institutions supporting market integration.

4. Previous research on the critical influence the state has in shaping these institutions. • 1. North(1981) : the state has two faces. The state and associated institutions provide the legal framework that enables private contracts for economic transactions. At the same time, the state is an instrument for transferring resources from one group to another.

5. Previous research about China’s market integration during the 18th century: • Mark Elvin(1973) and Xu and Wu(2000): the papers on the rise of commerce and internal trade in China during 18th century. • But a quantitative assessment of the performance of markets in China in a comparative context is still lacking.

6. The innovation of the paper: • 1. It is the first study to provide a comprehensive comparison of markets across Europe and most of China in the pre-industrial era( using cointegration analysis with data on grain prices from the 17th to 19th century). • 2. The analysis is useful for investigating the fundamental determinants of growth, as these two regions were relatively advanced as of the mid-18th century, and yet would start industrializing about 150 years apart.

7. 3. The paper contributes to recent literature that emphasize the beneficial role of markets in allocating resources( Isham and Kaufman 1999), as well as the importance of institutions that provide the framework in which markets operate( Hall and Jones 1999; Rodrik, Subramanian and Trebbi 2002). • 4. The paper provide a more complete picture of modern economic growth and the institutions such as market integration.

8. 2. Grain trade: Its basis in term of geography, technology, and institutions • Geography: Waterway; Trade routes; • Grain trade: the data about China and Western Europe’s scale about grain trade. • Transport cost and transport technology: • Overland transport; Inland waterway; Sea transport; • 细节：关于中国清代运输效率的历史材料，可以参见李伯重：《江南的早期工业化（1550~1850年）》，北京，社会科学文献出版社，2000。该书中间有一章是对清代造船工业的详细介绍，搜寻了大量有关船运（沿海沙船、内河平底船等船只）的历史材料，以及当时造船技术等方面的材料。这篇文章中还运用了方行等编著的《中国经济通史》（清代下卷）（北京，经济日报出版社，2000）的商品粮食贸易一章。这本书中的商品粮的数据即被该论文所采用。而且，后文对清代商业制度（牙行、商帮、国家的商业政策等）介绍的也与该书中的观点较为接近。

9. Qing China’s institutions（especially on grain trade)： • 背景：清代经济制度的一些情况，可以参阅王国斌（2002）（南京，江苏人民出版社）、罗威廉（2006，2008）（北京，人民大学出版社）、方行等（2000）（北京，经济日报出版社）、彭慕兰（2003）（中文版，南京，江苏人民出版社）等相关论著。其中的中心结论是：清代中国有可能具有比同时代的西欧大陆更为自由的市场制度。 • 1.The Qing state was a direct participant in the grain trade.(漕粮制度） • 2. The state also influenced the grain trade indirectly, by gathering information about agricultural practices, harvest outcomes, and grain prices throughout the empire(风雨粮价制度,这里还介绍二本见过的粮价著作：彭凯翔（2006）、刘业键（1993？）). • 3. Qing state support the grain trade by creating and maintaining transport routes, and by organization local communities in the upkeep of transport routes(漕运、河工等，商人在道路等设施的建设中也有很多募捐，一个小故事：鲍家“忠、孝、节、义”四坊——“乐善好施”坊） • The Qing code, the formal legal framework of Qing China, protected private property and hence trade through its articles against theft, sale of property belonging to others, as well as trespassing（尊重习惯法的清代法律） • The emphasize of the Qing Code, however, was on maintaining public order by providing incentives for lawful behavior through the threat of punishment rather than reconciling conflicts among private economic interest. • The domestic customs and transit taxes（榷关制度：例如，长江沿线在清代有江汉关、九江关、芜湖关、江海关，钱塘江流域有浒墅关，等等）：these taxes in China was typically below that of the countries in western Europe, even as late as the 18th century. • Second, non-official institutions in China were developed and enforced by guilds, self-governing organizations that were permitted a broad range of discretionary powers by the government(行商、牙行制度，当时尤其大宗贸易，若无牙行充当中介，会视为非法。商业会馆（同业、同乡，清代还有一个特色，同乡会馆一般同业），一般江西商人经营竹木、药材，徽州是文房四宝，平遥多为颜料商和票号商人）.

10. 3.Data, Econometric Method, and Results • 3.1 Data • The Western Europe data’s advantage • The Qing China data’s advantage • Subsamples of the Western Europe: 15 European cities, England • Subsamples of Qing China: Yangzi Delta, 10 provinces’ capitals, the markets located on the Yangzi River. • Figure 1 price variability: Qing China’s data is lower than in Europe, both in terms of price levels( column 1) as well as in terms of price changes( column 2). Cause: markets in China were more connected through trade, or relatively low storage costs.( Skewness )

11. 3.2 Econometric Methods: • Cointegration: • 相关知识：伍德里奇（中文版，2003）：560~561（DF、ADF）565~567（cointegration）.