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

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Author Info
Keller, Wolfgang
Shiue, Carol Hua

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Abstract

Current orthodoxy suggests that the Industrial Revolution began in Europe because European institutions promoted comparatively high levels of market efficiency. This Paper compares the actual efficiency 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. Using data on the spatial dispersion of grain prices 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 efficiency of markets in China and Europe was comparable in the late 18th century, except perhaps for areas of local economic activity, where Europe seems to have been ahead. Second, market efficiency in England was higher than in the Yangzi Delta region; and markets in England also performed better than in Western Europe as a whole. Third, market efficiency in 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, gains in market efficiency and growth might have occurred simultaneously. We discuss the implications of these findings for a number of explanations for long-run growth and the Industrial Revolution.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4420.

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Date of creation: Jun 2004
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Handle: RePEc:cpr:ceprdp:4420

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Related research
Keywords: arbitrage; cointegration; geography; growth; industrial revolution; institutions; international comparison; market efficiency; religion; trade; trade costs; vested interests;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
N10 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - General, International, or Comparative
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General

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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. Wolfgang Keller & Carol H. Shiue, 2008. "Institutions, Technology, and Trade," NBER Working Papers 13913, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Murat Iyigun, 2006. "Ottoman Conquests and European Ecclesiastical Pluralism," IZA Discussion Papers 1973, Institute for the Study of Labor (IZA). [Downloadable!]
  3. 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!]
    Other versions:
  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!]
    Other versions:
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