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Discussion Paper Details

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Title: Assessing market (dis)integration in early modern China and Europe

Author(s): Daniel M Bernhofen, Markus Eberhardt, Jianan Li and Stephen L. Morgan

Publication Date: May 2016

Keyword(s): China, common factor model, cross-section dependence, Europe, market integration, price convergence and the Great Divergence

Programme Area(s): Economic History, International Trade and Regional Economics and Macroeconomics and Growth

Abstract: This paper challenges established claims of comparable degrees of market integration in Europe and China on the eve of industrialization. Our empirical strategy focuses on the dynamics of price convergence and accounts for general equilibrium effects arising from common shocks and network effects. Using monthly grain prices for 1740-1820, our analysis uncovers a secular process of market disintegration in 221 prefectures of Qing China. Comparing our results with those for grain price panels from Western Europe we conclude that in terms of market integration the Great Divergence was well under way decades before the start of the 19th century.

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Bibliographic Reference

Bernhofen, D, Eberhardt, M, Li, J and Morgan, S. 2016. 'Assessing market (dis)integration in early modern China and Europe'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11288