The Agricultural Roots of Market Economy

Wed, Mar 25, 2015, 4:30 pm

Co-sponsored with the Contemporary China Colloquium. 


Yuhua Wang

University of Pennsylvania

The Agricultural Roots of Market Economy

I propose an agricultural theory of economic transformation that rice cultivation is conducive to market reform. Using sub-national data from China, I show that market reform is more successful in rice than in wheat regions after controlling for income, policy, geography, and in- terest groups, and that the effect of rice is as important as geography. Exploiting a geographic regression discontinuity design based on China’s Qin Mountains-Huai River line, I show that rice has a causal effect on market reform. Causal mediation analysis and historical evidence demonstrate that rice cultivation contributes to market economy through strong fiscal state ca- pacity, rather than through culture or public support, because it necessitates large water-control projects that require a strong state. The agricultural theory pushes back the causal chain to find a structurally deeper cause of reform outcomes in the developing world. Caution should be exercised when generalizing the theory outside Asia.

202 Jones Hall

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