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

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Author Info
Carol H. Shiue
Wolfgang Keller

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Abstract

Why did Western Europe industrialize first? An influential view holds that its exceptionally well-functioning markets supported with a certain set of institutions provided the incentives to make investments needed to industrialize. This paper examines this hypothesis by comparing the actual performance of markets in terms of market integration in Western Europe and China, two regions that were relatively advanced in the preindustrial period, but would start to industrialize about 150 years apart. We find that the performance of markets in China and Western Europe overall was comparable in the late eighteenth century. Market performance in England was higher than in the Yangzi Delta, and markets in England also performed better than those in continental Western Europe. This suggests strong market performance may be necessary, but it is not sufficient for industrialization. Rather than being a key condition for subsequent growth, improvements in market performance and growth occurred simultaneously. (JEL N13, N15, O47)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1189-1216
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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1189-1216

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Chiswick, Barry R. & Hatton, Timothy J., 2002. "International Migration and the Integration of Labor Markets," IZA Discussion Papers 559, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Keller, Wolfgang & Shiue, Carol Hua, 2003. "The Origins of Spatial Interaction," CEPR Discussion Papers 4138, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-25, December. [Downloadable!] (restricted)
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  6. Gonzalo, Jesus, 1993. "Cointegration and aggregation," Ricerche Economiche, Elsevier, vol. 47(3), pages 281-291, September. [Downloadable!] (restricted)
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  7. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  8. Shiue, Carol H., 2004. "Local Granaries and Central Government Disaster Relief: Moral Hazard and Intergovernmental Finance in Eighteenth- and Nineteenth-Century China," The Journal of Economic History, Cambridge University Press, vol. 64(01), pages 100-124, March. [Downloadable!]
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  12. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
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  15. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Murat Iyigun, 2006. "Ottoman Conquests and European Ecclesiastical Pluralism," IZA Discussion Papers 1973, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Jeffrey G. Williamson & Kevin H. O'Rourke, 2006. "Did Vasco da Gama Matter for European Markets? Testing Frederick Lane's Hypotheses Fifty Years Later," The Institute for International Integration Studies Discussion Paper Series iiisdp118, IIIS. [Downloadable!]
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  3. Wolfgang Keller & Carol H. Shiue, 2008. "Institutions, Technology, and Trade," NBER Working Papers 13913, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Guillaume Daudin, 2007. "Domestic Trade and Market Size in Late Eighteen Century France," Documents de Travail de l'OFCE 2007-35, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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