EH.Net Abstracts in Economic History

                ABSTRACTS IN ECONOMIC HISTORY
                     (c) 2007 EH.Net
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Name:  Carol H. Shiue
Email:  shiue at colorado.edu
Institution:  University of Colorado at Boulder

Co-author:  Wolfgang Keller, University of Colorado at Boulder

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

Internet Address of abstracted work:  http://spot.colorado.edu/~shiue/

By mail:
Department of Economics, UCB 256
University of Colorado
Boulder, CO
80309

Language:  English

Abstract:
An influential view on why industrialization began in Western Europe 
places a great deal of emphasis on how European allocative 
institutions were both necessary and sufficient conditions for modern 
growth. Western Europe's exceptionally well-functioning markets 
supported with a set of institutions led to more efficient resource 
use and provided far greater 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 of the world that were 
relatively advanced in the pre-industrial period, but would start to 
industrialize about 150 years apart. Using cointegration analysis on 
grain prices for about 250 markets from the 17th to the 19th century, 
the analysis covers economies that in total account for about 
two-fifths of the world's population in the mid-18th century. Our 
main findings include: first, the performance of markets in China and 
Western Europe overall was comparable in the late 18th century. 
Second, market performance in England was higher than in the Yangzi 
Delta region, and markets in England also performed better than in 
continental Western Europe. Third, the performance of markets in 
Western Europe improved between 1780 and 1830 in a dramatic and 
sudden fashion in comparison to what came before. Rather than being a 
key condition for subsequent growth, improvements in market 
performance and growth might have occurred simultaneously. The paper 
also compares the conditions and institutions that were underlying 
grain trade in the two regions; this provides the initial means to 
better understand what the advantages of England over China really 
were, and it adds to our knowledge on what institutions are necessary 
for industrialization and growth.

Bibliography: Shiue, Carol H. and Wolfgang Keller. "Markets in China 
and Europe on the Eve of the Industrial Revolution". Forthcoming, The 
American Economic Review.

Subject: W
Geographical Area: 0
Country/Region:  China, Western Europe, England
Time Period: 0

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