Carol H. Shiue   

 

CV

 

 

Research

 

Courses

 

Home

 

 

 

 

 

“Capital Markets in China and Britain, 1770-1860: Evidence from Grain Prices”, with Wolfgang Keller and Xin Wang, AEJ Applied Economics, July 2021, 13(3), pp.31-64  .

 

Abstract: Based on the most comprehensive grain prices available, we employ an asset-pricing model to estimate consistent interest rates and compare capital market development in Britain and China. Interest rates for Britain were lower than China’s on average by about three percentage points from 1770 to 1860. For country pairs with bilateral distance less than 200 kilometers, the regional capital market integration in the Yangzi Delta in China comes close to the British average, but at larger distances spatial interest rate correlations in Britain are twice those of the Delta, and three or more times as high as elsewhere in China. Overall, our results suggest capital market development differences at an early, so that capital market performance may be important for the Great Divergence that emerged between China and Western countries at this time.

 

 

“China’s Foreign Trade and Investment, 1800-1950”, with Wolfgang Keller, July 2020 NBER WP, forthcoming The Cambridge Economic History of China, Volume 2, Chapter 12.  

 

Abstract: The First Opium War (1840-42) was a watershed in the history of China. In its aftermath Britain and other countries forced open new ports to foreign trade through international treaties. Chinese institutions of trade were abolished and re-organized under Western management, Western legal institutions were introduced in China in form of courts and legal practices, and foreigners in China were tried according to the laws of their country of origin (extraterritoriality). To better understand the implications of these changes during the Treaty Port Era (1842-1943), we begin by discussing the attitudes towards foreign trade before 1840 for both China and the West. Drawing on information from the foreign-led Chinese Maritime Customs organization, we provide a synopsis of China’s foreign trade and investment both in terms of patterns and volumes. The paper highlights the link between foreign and domestic trade as well as the important role of new, previously not traded goods for welfare. Employing several outcome measures, we show that Western influence generated significant benefits to China’s economy, and the results suggest that the geographic scope of these benefits reached into areas far beyond the treaty ports.

 

“International Transactions: Real Trade and Factor Flows between 1700 and 1870”, with Wolfgang Keller and Markus Lampe, March 2020 NBER WP, forthcoming The Cambridge Economic History of the Modern World, Volume 1.  

 

Abstract: This paper describes broad regional and temporal trends in the evolution of international trade and international factor flows between 1700 and 1870, including key differences in trade costs across space and time. We find trade links in Western Europe and the European colonies of North America intensified at the same time these regions experienced the initial industrial revolution and the spread of industrialization, which led to sustained economic growth. At the same time, global differences in specialization and income emerged. To understand the contribution of global market forces, as well as colonialism to these differences, the chapter lays out theoretical reasons for links between trade and economic growth and examines related historical arguments and evidence. We conclude that trade contributed to global divergence, but the magnitude and mechanisms through which trade affected global welfare lies not so much in the direct impact of trade and specialization, but in multiplier effects emerging from the interactions of trade with other factors that affect economic development.

 

 

“Social Mobility in the Long Run: An Analysis with Five Linked Generations in China, 1300-1900”.

 

Abstract: The extent of social mobility may affect the level of inequality that a generation inherits from previous generations and it also may determine future growth and prosperity.  This paper examines the factors that shape long-run social mobility in over the lifetimes of 10,000 Chinese men belonging to 7 lineages where status over each generation can be is observed during the period 1300 to 1900. I find, first, that times of greater inequality are times of status persistence, while high mobility rules when inequality is low. Second, conditional on the father, grandfathers play only a minor role for son status. However, a focus on fathers and sons could still miss important factors of mobility persistence; I find non-lineal relationships to uncles and the extended family of in-laws matters. Social mobility is affected by marriage, with intermarriage being a strong force towards status persistence.  Third, while social mobility was relatively low by most standards over the sample period, it increased over time, with a possible reversal in the late 19th century.  I estimate typical intergenerational status elasticities in the range of 0.5 to 0.7. I show that the rich and the poor might fare rather differently as such changes in overall mobility occur.

 

 

“Human Capital and Fertility in Chinese Clans Before Modern Growth”, Journal of Economic Growth, 2017, 22(4), pp. 351-396.

 

Abstract: A stylized fact of modern growth is that as countries become richer, education levels rise while family size decreases. This paper provides evidence that well before the onset of modern growth, changes in the return to education affected household choice of children’s quantity versus quality.  The setting is in Anhui Province, China over the 13th to 20th centuries. I show that the civil service examination system underwent long-term changes affecting the return to education, providing a means to test whether incentives for acquiring educated affected fertility decisions. Employing an intergenerationally-linked dataset drawn from over 43,000 individuals, I first show that as the state examination’s discretionary practices had been largely eliminated by the 17th century, increasing the return to education, households with a lower number of children had a higher chance that one of their sons would substantially invest into human capital. Second, I demonstrate that this negative relationship between fertility and education disappeared with a fall in the return to education in the 19th century. Taken together, my findings provide support for the hypothesis that fertility choices respond to changes in the return to human capital. The implications of these findings for theories of economic development are discussed.

 

 

“A Culture of Kinship: Chinese Genealogies as a Source for Research in Demographic Economics”, Journal of Demographic Economics, December 2016, 82(4), pp. 459-482.

Abstract: This paper discusses the use of Chinese genealogies for research on economic demography. I focus both on what is known about the genealogy as a data source, and what are the open questions for future research. Chinese genealogies contain individual level records at the individual level. With the publication of new catalogues and efforts to collect genealogies, the number of genealogies is even larger than previously thought, with most dating to the late Ming (1368-1644) and Qing (1644-1911) Dynasties. These records contain information about the Chinese population history, over a period for which there is no alternative source of information. Yet the source still remains largely unexploited. Although the work of transcribing the data is significant, and selection biases need to be carefully considered, preliminary analysis of the data for a sample of married men for Tongcheng County in Anhui Province suggests these data are a rich source of information for demographic and economics research.

 

  

 

“Foreigners Knocking at the Door: Trade in China During the Treaty Port Era”, with Wolfgang Keller and Javier Andres Santiago, Explorations in Economic History, 2017, 63, pp. 26-43.

 

Abstract: We employ a new, commodity-level dataset on the flow of goods between fifteen major treaty ports to estimate a general-equilibrium trade model for China around the year 1900. The distribution of welfare effects depends critically on each port's productivity, China's economic geography because it affects trade costs, and the extent of regional diversity in production because this affects the potential gains from trade. We utilize this framework to quantify the size and distribution of welfare effects resulting from new technology and lower trade costs that came with the treaty ports. Findings show that domestic markets resulted in ripple effects, which transmitted the effect of the international trade opening beyond the foreign concessions. However, because differences in relative productivity across regions were relatively low, the welfare gains from domestic trade improvements were limited.

 

 

“Endogenous Formation of Free Trade Agreements: Evidence from the Zollverein’s Impact on Market Integration”, with Wolfgang Keller, Journal of Economic History, December 2014.

 

Abstract: The Zollverein was arguably the most important free-trade agreement of the 19th century. This paper investigates the economic impact of the Zollverein on trade in Germany. Although 1834 is the official date of the Zollverein’s establishment, member states in fact joined in a non-random sequence over several decades. This was because the benefits of becoming a member increased, both as the size of the union increased, and as membership in the union became increasingly important for accessing foreign markets. Our key innovation in this paper is to incorporate the endogenous effects of accession into an estimate of the economic impact of the Zollverein customs union. We find these effects are important--our estimated effects are several times larger than the simpler estimates that do not take these effects into account. The paper discusses the implications of this for Germany’s economic history as well as for other studies of trade liberalization.

 

 

“The Evolution of Domestic Trade Flows when Foreign Trade is Liberalized, Evidence from the Chinese Maritime Customs Service”, with Wolfgang Keller and Ben Li. In Institutions and Comparative Development, 2012.

 

 

“China’s Foreign Trade, Perspectives from the Last 150 Years, with Wolfgang Keller and Ben Li, The World Economy, June 2011, 34(6), pp. 853-892.

 

Abstract: This paper studies the trade of China in the past 150 years, starting from the first opening of China after the Opium War. The main purpose of the paper is to identify what is (and was) China’s ‘normal’ level of foreign trade, and how these level changed under different trade regimes, from 1840 to the present. We present new evidence on China’s foreign trade during the treaty port era (18421948), drawn from disaggregated trade data collected by the Chinese Maritime Customs Service, that yields important findings for current research. First, although the volume of foreign trade remained limited initially, there was a notable expansion in the diversity of products, with many new goods being imported into China. Second, the regional diffusion of foreign goods through China was greatly facilitated by the expansions of the port system. Third, the importance of Hong Kong as an intermediary in China’s trade has undergone longterm fluctuations suggestive of learning effects. China’s recent wave of liberalization has led by the early 1990s to a trade level comparable to the high of the 1920s. While much of China’s recent growth in world trade is in line with her income growth, there is no doubt that China’s trade openness today, comparable by some measures to Denmark’s, is a stunning reversal relative to the pre1978 and also the pre1840 period. The paper emphasizes the roles that history and institutional change have played in this. 

 

 

“Institutions, Technology, and Trade,” with Wolfgang Keller, December 2008.

 

Abstract: We study the importance of technology and institutions in determining the size of markets in five different countries and fifteen different German states. The setting of 19th century Europe presents a unique opportunity to address this issue, since it witnessed fundamental change in both dimensions. At the beginning of the century, numerous customs borders, separate currencies with different monetary systems, and poor transportation facilities were major obstacles that held back trade.  Important institutional change, through the Zollverein customs treaties and currency unification, and major technological innovation in the steam train all had a role in increasing market size as measured in terms of the spatial dispersion of grain prices across 68 markets.  However, we find that the impact of steam trains is substantially larger than the effects from customs liberalizations and currency agreements in increasing market size, where correcting for the potential endogeneity in institutional and technological changes are crucial for this result.  We also find that a state’s institutions influence the rate of adoption of steam trains, thereby identifying an important indirect effect from institutions on economic performance.  The institutional and technological changes account for almost all of the decline in price gaps over this period.

 

 

“Markets in China and Europe on the Eve of the Industrial Revolution,” with Wolfgang Keller, American Economic Review, September 2007.

 

Abstract: Prevailing views suggest the Industrial Revolution began in Europe because markets had gradually become more efficient and by the 18th century the scope of economic activity was far larger than in other parts of the world.  This paper compares the actual performance of markets in Europe and China, two regions of the world that were relatively advanced in the pre-industrial period, but would start to industrialize about 150 years apart.  The analysis covers economies that account for about two-fifths of the world’s population in the mid-18th century, and it considers some three centuries of data.  Our findings suggest that relative levels of market function in China and Europe were similar prior to the Industrial Revolution.  Higher efficiency in Europe is seen only in the nineteenth century when industrialization was already underway.  Moreover, these improvements occurred in a dramatic and sudden fashion, further casting doubt on the evolutionary view of market development.  Rather than being a key condition for subsequent growth, gains in efficiency appeared simultaneously with the turning point of modern growth.  We discuss the implications of these findings for a number of explanations for long-run growth and the Industrial Revolution.

“The Origins of Spatial Interaction: Evidence from Chinese Rice Markets, 1742-1795,” with Wolfgang Keller, Journal of Econometrics, September 2007.

Abstract: Geography shapes economic outcomes in a major way.  This paper uses spatial empirical methods to detect and analyze trade patterns in a historical dataset on Chinese rice prices.  Our results suggest that spatial features were important for the expansion of interregional trade.  Geography dictates, first, over what distances trade was possible in different regions, because the costs of ship transport were considerably below those for land transport.  Spatial features also influence the direction in which a trading network is expanding.  Moreover, our analysis captures the impact of new trade routes both within and outside the trading areas.  We also discuss the long-run implications this might have.

 

 

“From Political Fragmentation towards a Customs Union: Border Effects of the German Zollverein, 1815 to 1855,” European Review of Economic History, August 2005.

 

Abstract: Over the first half of the 19th century, the Prussian-German Customs Union known as the Zollverein gradually unified a scattered confederation of sovereign states under an internal free trade agreement. This paper uses grain prices to quantify the differential effect of the Zollverein for market integration among Zollverein members versus European powers that were not part of the Zollverein, including France, Switzerland, and the Habsburg Empire of Austria.  Overall, this border effect is consistently and substantially less than border effect estimates from contemporary samples.  For the 1834 liberalization round, the implied border effect, calculated as the implied decrease in distance that comes about as the result of the customs border being eliminated, is between 140 and 160 kilometers, with the smaller distance for non-German speaking cities, and the larger distance for German speaking cities.  Thus, common language in this sample provides an additional benefit of lowering trade barriers by 11-15% in distance, making border elimination more valuable among German-speaking cities than for mixed-language-speaking cities.  The paper offers a few reasons for why I estimate smaller border effects than are found in studies on 20th century economies, and the analysis gives a new historical perspective on what drives trade costs and changes in market integration.

“Market Integration and Economic Development, A Long-run Comparison,” with Wolfgang Keller, Review of Development Economics, February 2007.

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 programs.

“The Political Economy of Famine Relief in China, 1740-1820,” Journal of Interdisciplinary History, Summer 2005. 

Abstract:  In pre-industrial economies, people often faced unpredictable and catastrophic risks from crop failures brought on by erratic weather patterns, pests, and epidemics.  In China, tax exemptions and tax postponement, as well as local state sponsored granaries were used to forestall and curtail the impact of food crises.  Relatively little is known about how the application of these two types of relief measures evolved over time across provinces.  To study the conceptual issues involved, I present a simple model that separates resource constraints from agency problems.  Under this framework, the decision to deviate from officially ascribed duties comes about because the terms of famine relief funding and the command and control structure of the state produces in a class of officials the rational incentive to deviate from the objectives announced by the center.  Because similar incentives are perceived by officials of a certain class, their responses may be also similar, and this in turn, I suggest, may produce the kinds of macroeconomic patterns of storage and relief that are consistent with those that we observe in the data.

“The Rise of Markets in the Western World: A Global Comparison,”  Russell Sage Foundation Working Paper #211, May 2003.

Abstract:  Does trade cause growth?  How about the Industrial Revolution?  A widely held view is that the more efficient markets in Europe provided an important reason of why the Industrial Revolution started its spread from Europe in the late 18th century, and not from China.  Among the reasons that have been proposed for this supposed efficiency gap are differences in terms of geography, culture, nationality, population, institutions, or historical ‘accidents’ such as the discovery of the Americas.  In this paper we compare the actual efficiency of markets using data on the spatial dispersion of grain prices from the 15th to the early 20th century.  This analysis is made possible by a new detailed and consistent set of grain price data covering about 60% of China in the 18th century—a part of China larger than Western Europe and contributing about one-fifth of the world’s population at the time.  We find, first, that the efficiency of markets in China and Europe was broadly comparable in the late 18th century, except perhaps for local economic activity, in areas of 150 kilometers or less, where Europe seems to have been ahead.  This provides new evidence on a number of explanations for the Industrial Revolution.  Second, the differences in market efficiency appear to be small relative to the differences in economic performance between China and Europe during the 19th century.  Rather than being a key condition for subsequent growth, gains in market efficiency and growth might occur essentially simultaneously.

“Local Granaries and Central Government Disaster Relief: Moral Hazard and Intergovernmental Finance in 18th and 19th Century China,”  The Journal of Economic History, March 2004, 64(1), pp. 101-125. 

Abstract:  During the eighteenth and nineteenth centuries, the Chinese state attempted to administer famine relief partly through a nationwide institution of local granaries.  This paper explores regional variations in the performance of this institution to understand the reasons for its ultimate breakdown.  The evidence suggests granary storage levels were systematically lower in provinces that received more frequently disaster relief from the central government; an unintended consequence of disaster relief was that it modified local incentives for self-insurance and led to an incompletely resolved moral hazard problem.  China’s experience provides an instructive example of the long-term dynamics present in intergovernmental policies.

“Transport Costs and the Geography of Arbitrage in Eighteenth Century China,”  American Economic Review, Vol. 92, No. 5, December 2002.

Abstract:  Trade has been considered a condition for growth and development, a view that might have merits in explaining the rise of the Western world.  I use a new data set from archival sources of eighteenth-century China to revisit this question.  This analysis suggests previous studies of market integration, which attribute much growth to a reduction in transport costs, have overestimated these effects.  I find the overall level of market integration in China was higher than previously thought, and, intertemporal effects are important substitutes for trade.  Both factors reduce the importance of trade as a unique explanation for subsequent growth. 

 

 Acrobat Reader Software