Markets in China and Europe on the Eve of the Industrial Revolution
Shiue, Carol H., and
Wolfgang Keller. 2007. "Markets in China and Europe on the Eve of the Industrial Revolution."
American Economic Review,
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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Shiue, Carol H.