Keller, W., J. Andrés-Santiago, and C.H. Shiue
Explorations in Economic History – 2017, 63, 26-43
Keywords: Domestic trade frictions, Welfare gains from trade, 19th century
Abstract: We employ a new, commodity-level dataset on the flow of goods between fifteen major treaty ports to estimate a general-equilibrium trade model for China in the late Qing era. The distribution of welfare effects depends critically on each port’s productivity, 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 that emerged during the Treaty-Port Era. Our results suggest that the new trade with foreign countries led to significant changes in domestic trade relationships. There was a limit to how much could be gained through increased domestic trade, however, because differences in productivity across regions were relatively low.