Using a prefecture-level panel dataset from the 1840s-1920s, this paper explores the effect of historical concessions on the rise of the modern economy in China. By applying a DID method, it is found that concessions in Chinese history have a significantly positive effect on the rise of China's modern economy, measured by modern native firms and native banks. More specifically, it shows that the treaty ports with concession(s) perform better in boosting modern economic development than the treaty ports without concession. This effect is still significant after controlling for the effects of infrastructure conditions, conflict, and foreign investment. I argue that the effect of concession partly comes from the fact that concessions could provide better protection over property safety, es...[ Read more ]

Using a prefecture-level panel dataset from the 1840s-1920s, this paper explores the effect of historical concessions on the rise of the modern economy in China. By applying a DID method, it is found that concessions in Chinese history have a significantly positive effect on the rise of China's modern economy, measured by modern native firms and native banks. More specifically, it shows that the treaty ports with concession(s) perform better in boosting modern economic development than the treaty ports without concession. This effect is still significant after controlling for the effects of infrastructure conditions, conflict, and foreign investment. I argue that the effect of concession partly comes from the fact that concessions could provide better protection over property safety, especially during the Warlord Period, when the political environment was not stable. In addition, concessions may also have positive influences on the legal system and improvement of administration. The administrative institutions favor the merchant elites in many aspects, such as a reasonable tax burden. The effect of concessions with a common law system surpasses that of those with a civil law system.

Keywords: Concession, Modern Economy, Property Safety, Legal System, China