Research Proposal for the 5th Asian Historical Economics Conference (Seoul, South
Korea, 2016)
Legacy of War: The Long-term Effect of Taiping Rebellion on
Economic Development in Modern China
Nan Li* and Debin Ma**
*Shanghai University of Finance and Economics ([email protected])
**London School of Economics, ([email protected])
Abstract
In this paper we investigate the impact of Taiping Rebellion in the mid-nineteenth
century on later economic development in China. We use a unique prefecture-level dataset on
containing civil war intensity to assess whether the war damage led to persistent economic
effect. We compare the heavily damaged prefectures to other prefectures controlling for prewar demographic and geographic characteristics, and use an instrumental variable approach
exploiting distance to Tianjing, capital of the Taiping Heavenly Kingdom. Our findings
indicate that Taiping Rebellion has negative impacts on population density, but positive effect
on industrialization and urbanization through change in endowment, human capital, and
official stricture. These findings also shed light on the origin of industrialization and
urbanization in Modern China.
Keywords: Taiping Rebellion, Economic Development, Modern China, Civil War
JEL Classification: J10, N45, N95, R11
The adverse impacts of military conflict and war on economic performance are clear
to all. By destroying physical and human capital accumulation, infrastructure, and
institution, military conflict and war have a negative impact on economic development
(Kiker and Cochrane, 1973; World Bank, 2003; Acemoglu, et al., 2011; Miguel and Roland,
2011). However, the long-run economic consequences of war are unclear (Miguel and
Roland, 2011). Some scholars, such as Azariadis and Drazen (1990) and Sachs (2005) asset
that war damage to the capital stock could lead to a “conflict trap” that condemns an
economic to long-term underdevelopment. Other scholars argue that war may also have
positive impacts on long-run economic performance by institution and technology. For
instance, it is often argued that military research and development leads to faster
technological progress, which may offset war damage. The institution created by the
French Revolution has positive the long-run economic impact on subsequent economic
growth within Germany (Acemolgu et al, 2011).
There is a large literature on the conflict and war (e.g. Fearon, 1995; Faron and Laitin,
2003; Acemoglu et al, 2011; Bai and Kung, 2011; Kung and Ma, 2015), but the long-run
economic impacts of war remain largely unexplored empirically (Blattman and Miguel,
2010; Miguel and Roland, 2011). One of possible constrain for empirical studies is the
lack of systematical data on war damage and economic performance in war and post-war
societies. Another important reason is the difficulty of identifying causality between war
and economic condition caused by simultaneous problem and omitted variable bias. In
this paper, we exploit a data-rich and important civil war in mankind, Taiping Rebellion,
to investigate war impact on long-run economic development.
Taiping Rebellion, as the most merciless of all wars in modern world (Ho, 1959;
Wakeman, 1966), has a great effect on China and World (Fairbank and Liu, 1978). This
civil war lasted from 1851 to 1864 (14 years) and involved vast majority of southern China.
The death directly and indirectly caused by this war could reach at least 70 million (Ho,
1959; Cao, 2001; Li and Lin, 2015). As a result of war, the economic center of China, the
Lower Yangzi region, suffered war damage and declined. After Taiping Rebellion, however,
this region not only recovered from the effects of the war and became the economic
center of China again, but also much of modern industries rapidly grew in Jiangsu and
Zhejiang provinces. Until now, there is no any literature discuss the economic
consequence of Taiping Rebellion in modern China. Hence, in this paper, we attempt to
answer following two questions: (1) What effect does Taiping Rebellion on economic
development, urbanization and industrialization in modern China? (2) What are the
channels linking Taiping Rebellion to subsequent economic performance?
To answer previous two questions, using a unique prefecture-level dataset on
population, urbanization and industrialization in the Late Qing dynasty and the early years
of the Republic of China, we investigate the long-run economic consequence of Taiping
Rebellion. Our empirical analysis indicates that persistent correlation between the war
damage and long-run economic development proxied by population density, urbanization
and number of workers and factories in 1920s and 1930s. We compare the heavily war
damage prefectures to other prefectures controlling initial economic condition and
geographical characteristics, and use an instrumental variable approach exploiting distance
to Nanjing, the capital of Taiping Heavenly Kingdom. Taiping Rebellion has negative
impact on population density and positive effect on urbanization and industrialization in
1930s. We also find three possible channels through which the Taiping Rebellion may have
caused the difference in urbanization and industrialization across prefectures: (1) its
impact on endowment of labor to capital; (2) its impact on education opportunity; (3) its
impact on local political structure.
These findings not only firstly shed light on the long-term effect of Taiping
Rebellion on later economic development, but also relate to a broader literature about the
enduring effects of historical events on economic development. The most famous
example concerns the colonial origin of comparative development (Engerman and
Sokoloff, 1997; La Porta et al., 1998; Acemoglu et al., 2001; 2002). Another example is
Nathan (2008)’s argument that African slave trade hampered the economic development
of regions which suffered large population loss. In addition, this paper may also enrich a
large literature on the long-run effect of conflict and war on economic performance. For
instance, Davis and Weinstein (2002) and Miguel and Roland (2011) show significant longrun implications of war using data on Japan and Vietnam. Unfortunately, however, the
mechanism linking conflict and war to long-run implications is lack. This paper discusses
the root of the differences in economic performance within regions caused by war. At
last, this paper also helps us to understand the historical origin of inequality in
urbanization, industrialization in modern China.
The rest of the article is organized as follows. Section II we provide an overview of
the history of Taiping Rebellion and change in social and economic performance after
war. Section III discusses our empirical model and data. Section IV provides our reduced
–form evidence on the association between various measures of Taiping Rebellion and
our proxy for economic development (population density), urbanization and
industrialization. Section V shows three possible channels linking Taiping Rebellion to
later economic performance. Section VI is our conclusion.