Economic Impact of Infrastructure in China

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Economic Impact of Infrastructure in China
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Market Integration and Economic Development
(Keller and Shiue, 2004)

• Examine market integration and trade of twelve
  Chinese provinces 1723-1993.
• Market integration measured by relationship
  between rice prices of different provinces.
• Findings
• Contemporary markets are more integrated than
  historical levels
• It is also found that a significant degree of
  market integration for distances up to about 700
  kilometers in the early 18th century.
• The degree of market integration in the 1720s is
  a very good predictor of per capita income in the
  1990s.

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Transport Costs and Interregional Trade in 18th
Century (Shiue, 2002)

• Data Previously unpublished archival prices on
  grain, historical weather data, distance
  measurement, and storage records (covering more
  than half of the 18th century).

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China in 18th Century

• Foreign trade was largely restricted and rice
  exports were prohibited.
• Domestic interregional trade over long distances
  relied on natural waterways (10 cost of land
  transportation)
• The Yangzi River (3,500 miles)
• The Yellow River (3,000 miles)
• The Grand Canal (1,000 miles)
• About 30,000 miles of waterway navigable
  year-round.
• Offshore trading along the long coastal stretch
  between the southern provinces, the Yangzi Delta,
  and Manchuria.

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Conclusion

• Findings
• The correlation between two markets seems
  systematically related to the costs of trade
  between the markets
• 2.4 million tons of grain moved across provincial
  borders
• Most of the commodities were transported by
  private merchants (as least since 1753).
• The importance of trade to growth has been
  overestimated.
• Even though China did not grow as much as
  economies in the West, a substantial part of
  China was integrated through trade.

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Interregional Integration vs. Intraregional
Disintegration 1738-1911 (Li, 2000)

• The Qing dynasty (1644-1911)
• Views by Economic Historians
• The older view Traditional Chinese culture was
  hostile to science and entrepreneurship.
• The California school Emphasize the Qing states
  constructive policies in agricultural
  development, grain storage, famine relief, and
  the settlement of new regions, and blooming
  merchants and interregional trade and commerce.
• An alternative hypothesis Interregional trade
  networks may be independent of intraregional ones.

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Empirical Evidence

• Data Grain prices from Zhili (Hebei) province in
  North China from 1738 to 1911.
• Findings
• The provinces local grain markets gradually
  fragmented
• The deterioration of transport routes (the
  maintenance of internal waterways declined in the
  early 19th century)
• The provincial market as a whole grew more
  closely integrated with external markets.

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Infrastructure Investments in China
Total
Transportation
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Infrastructure and Economic Growth in China
(Demurger, 2001)

• Idea It is believed that investment in physical
  infrastructure, including transport services,
  telecommunication, power, and irrigation, can
  improve the productivity of all inputs by
  facilitating market transactions and technology
  spillover between firms or industries.
• Fact By 1997, 96 of villages in China had
  electricity 87 were accessible by vehicles and
  90 by postal services.
• Plan An ambitious investment policy was
  announced in Feb. 1998 to build roads, railways,
  and power stations, with the total expenditure
  over three years (US750 billion).
• Inequality The most pronounced regional
  difference in the availability of transport
  infrastructure can be found between coastal and
  interior provinces.

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Findings

• Data A sample of 24 provinces from 1985 to 1998.
• Findings Differences in geographical location,
  transport infrastructure, and telecommunication
  facilities account for a significant part of the
  observed variation in the growth performances of
  provinces.

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Infrastructure and Development in Rural China
(Fan and Zhang, 2004)

• Findings
• Infrastructure and education seem to be more
  important for nonfarm production than
  agricultural production.
• For the overall rural economy, public capital and
  education explained about 45 of the higher
  productivity in the eastern region. In the
  western region, lower public capital accounted
  for 26 of the lower productivity.

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Telephones, the Internet, and the Digital Divide
(Harwitt, 2004)

• Digital Divide
• The gap between individuals, households,
  businesses and geographic areas at different
  socio-economic levels with regard both to their
  opportunities to access information and
  communication technologies and to their use of
  the Internet for a wide variety of activities.

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Market Integration A World Bank Survey (2005)
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