Trade shocks, industrial growth, and electrification in early 20th-century China

Abstract

How does demand from the industrial sector promote the diffusion of electricity? Using newly digitized data on Chinese power plants from 1912 to 1935, we examine the impact of a trade shock, which protected the domestic manufacturing sector from import competition, on the adoption of electricity. To establish a causal relationship, we exploit time variations in imported manufactured goods caused by China's unexpected recovery of tariff autonomy in 1929 and cross-sectional variations in local access to treaty ports. We find that the reduction in manufactured imports resulted from the tariff shock led to the expansion of the local electricity sector. Further analysis suggests that the booming domestic industrial sector rather than population agglomeration was the key channel for the effect.