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Foreigners Knocking on the Door: Trade in China During the Treaty Port Era

Javier Andres Santiago, Wolfgang Keller () and Carol Shiue ()

No 11040, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Uneven development within countries suggests that domestic trade frictions are important. Trade flows within a country, however, are rarely observed. We employ a new dataset on trade between fifteen Chinese treaty ports to examine the importance of domestic frictions around the year 1900. The distribution of welfare effects depends on each port's productivity and factor costs, China's economic geography as it influences trade costs, as well as the degree of regional diversity in production, which increases the potential gains from trade. We utilize this framework to quantify the size and distribution of welfare effects resulting from new technology and lower trade costs. Domestic trade frictions turn out to be substantial, far from the frictionless world that is commonly assumed. Moreover, geographic barriers loom large in shaping the welfare gains from technology improvements and trade cost reductions. We find, however, that an important explanation for why there was a limit to what could be gained through increased domestic trade was that the differences in productivity across regions ofChina in the 19th century were relatively low.

Keywords: 19th century China; domestic trade; economic integration; welfare gains (search for similar items in EconPapers)
JEL-codes: F1 N15 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna and nep-int
Date: 2016-01
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