World Economy· 2026Q1
Historical Trade Liberalization and Modern Innovation: Evidence From China's Treaty Ports
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- 2026year
Short summary
Firms in China's historical treaty port regions show stronger innovation performance today, a legacy of forced market opening from 1842-1943.
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Key points
- Firms in historical treaty port regions demonstrate superior innovation performance compared to other regions.
- This effect persists even after controlling for pre-existing regional differences and firm characteristics.
- The findings are robust to extensive checks addressing contemporary trade, historical agglomeration, and endogeneity concerns.
- The legacy of early trade liberalization, including foreign investment and human capital, explains persistent regional innovation disparities.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT Does trade liberalization exert a long‐lasting influence on innovation? To answer this question, we exploit a unique historical setting: China's forced market opening through the treaty port system from 1842 to 1943, combined with comprehensive firm‐level innovation data from recent decades. Using a spatial comparison framework, we show that firms located in historical treaty port regions continue to exhibit stronger innovation performance than those in other regions, even after controlling for pre‐existing regional differences. This finding remains robust to extensive checks addressing contemporary trade liberalization, firm characteristics, historical agglomeration, alternative innovation measures and endogeneity concerns related to treaty‐port selection and firm sorting. Our findings underscore the importance of historical path dependence in shaping contemporary innovation outcomes and suggest that the legacy of early trade liberalization, such as the accumulation of foreign investment and human capital, offers a compelling explanation for persistent regional disparities in innovative activity.
The authors' abstract, as published at the source. World Economy, 2026 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance