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Memories of colonial law: The inheritance of human capital and the location of joint ventures in early-reform China

Cheryl Long, Peter Murrell () and Li Yang

China Economic Review, 2019, vol. 58, issue C

Abstract: Using a unique data set of Chinese foreign direct investment (FDI) contracts from the 1980s and early 1990s, we explore those mechanisms of historical persistence resulting from China's unique colonial experience. Adopting difference-in-differences as well as difference-in-difference-in-differences analysis within conditional logit, we provide evidence that foreign investors favored locating FDI in Chinese cities in which their home country had a colony in the 19th century and that a human-capital channel best explains this persistent impact of colonial experience. While alternative explanations for long-term persistence are not consistent with the empirical findings, the results suggest that legal human capital inherited from colonial times affected economic decisions after 1978. Thus, we attempt to advance the literature on history's long-lasting influence by proposing one particular mechanism of persistence—memory of legal institutions, or inheritance of legal human capital.

Keywords: Historical persistence; Colonial influence; FDI location; China; Human capital (search for similar items in EconPapers)
JEL-codes: K00 N95 O10 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:58:y:2019:i:c:s1043951x1930029x

DOI: 10.1016/j.chieco.2019.03.003

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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