May 20, 2014

A historical examinations of the return to "luck" (China)

In this article Peter Temin argues in favor of a more intimate link between economic development and economic history. He looks at the evolution of economic history and discusses the role of institutions and the work of famous economic historians, such as Douglass North. One of the examples of recent work in quantitative economic history and economic development is this paper by Dan Li and Nan Li which looks at a very specific event in China history: the migration to Manchuria. The authors examine if migrants who moved to Manchuria right after the horrific pneumonic plague of 1910-1911 gained economic benefits in the long term (land accumulation, for example). In a way the authors examine the return to "luck."

The abstract:
Using unique rural household survey data for Manchuria (Northeast China) from the 1930s, we measure the economic return to “luck” of moving to the right place at the right time. Manchuria, which attracted millions of migrants from North China in the first half of the twentieth century, was hit by a devastating pneumonic plague epidemic in 1910-11. Employing a differences-in-differences method, we find that the migrants who moved to plague-hit villages (rather than non-plague-hit villages) right after the plague ended (the 1912-13 cohort vs. later cohorts) prospered most: they owned at least 90% more land than those who failed to do so. Our main results hold after we control for other factors that influence the wealth of migrants and survive various robustness checks. Moreover, no evidence is found that those who made a good move generally “outsmarted” those who did not. Our findings confirm that the economic opportunities in a receiving locality encountered by lucky migrants have long-term welfare implications for them.
The Qing dynasty strategically opened up Manchuria, which was originally mainly inhabited by ethnic minorities, to Han Chinese starting in the mid-nineteenth century. With the arrival of railroads in 1890s, Manchuria experienced one of the world’s largest population movements in the early twentieth century. According to Gottschange (1987, p.462), from 1880 to 1942, the average annual population flow is estimated to be about half a million, which resulted in a total net population transfer of over 8 million. This migration was comparable in size to the westward movement in the United States between 1880 and 1950 and twice as large as the great nineteenth-century emigration from Ireland. 
Recommended paper. It has a clear and ingenious empirical strategy.  

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