A Thirst for Silver: Trade Shock, Taxation, and Local Unrest in Nineteenth-Century China

Ting Chen (), Jianan Li (), Chong Pang () and Yuan Zi ()
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Ting Chen: School of Business, Hong Kong Baptist University
Jianan Li: School of Economics, Xiamen University
Chong Pang: Barcelona School of Economics and Universitat Pompeu Fabra
Yuan Zi: Geneva Graduate Institute and CEPR, https://www.graduateinstitute.ch/international-economics-presentation

No 24-2026, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: Under what conditions can globalization become a source of state fragility? We provide the first systematic evidence that rigid trade and taxation systems, together with the collapse in global silver production following the Spanish American wars of independence, fueled rising silver prices and social instability in early nineteenth-century Qing China. Using newly assembled county-level panel data and historical commercial routes, we show that regions farther from Canton—the empire's sole legal international port—experienced larger increases in silver prices and greater social unrest following the shock. Silver-denominated taxation was central to this relationship: because taxes were largely fixed in silver terms, rising silver prices sharply increased real tax burdens and fueled instability. Quantitatively, the silver shock reduced China's aggregate welfare by 1.16 percent, with fiscal rigidity accounting for most of the loss. Opening additional international ports would have mitigated the destabilizing effects of the shock, but only modestly. By contrast, fiscal reform would have been far more effective.

Keywords: Trade Costs; Silver Shock; Fiscal Capacity; Social Unrest; Chinese Economy (search for similar items in EconPapers)
JEL-codes: F13 L52 R38 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2026-09-07
New Economics Papers: this item is included in nep-cna, nep-his and nep-min
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