Memories of Colonial Law: The Inheritance of Human Capital and the Location of Joint Ventures in Early-Reform China

55 Pages Posted: 2 Mar 2016 Last revised: 23 Dec 2017

See all articles by Cheryl Xiaoning Long

Cheryl Xiaoning Long

Xiamen University

Peter Murrell

University of Maryland - Department of Economics

Li Yang

Paris School of Economics

Date Written: December 20, 2017

Abstract

Using a unique data set of Chinese FDI contracts from the 1980s and 1990s, we explore mechanisms of historical persistence in the context of China's unique colonial experience. Using difference-in-difference estimations, we show that there was a tendency for foreign investors to form joint ventures in Chinese cities where their home country had a colonial presence in the 19th century. Using a difference-in-difference-in-difference approach we provide empirical evidence in support of the human-capital channel for explaining the historically persistent impact of colonial experience. Specifically, the most parsimonious explanation for our results is that legal human capital inherited from colonial times affected economic decisions in the reform era. Alternative explanations for long-term persistence are not supported. The study thus contributes to the research on history's long-lasting influence by highlighting the importance of one particular mechanism of persistence — historical memory of institutions, or simply legal human capital.

Keywords: historical persistence, colonial influence, FDI location, China, human capital

JEL Classification: K00, N95, O10

Suggested Citation

Long, Cheryl Xiaoning and Murrell, Peter and Yang, Li, Memories of Colonial Law: The Inheritance of Human Capital and the Location of Joint Ventures in Early-Reform China (December 20, 2017). Available at SSRN: https://ssrn.com/abstract=2740059 or http://dx.doi.org/10.2139/ssrn.2740059

Cheryl Xiaoning Long

Xiamen University ( email )

Xiamen, Fujian 361005
China

Peter Murrell (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3476 (Phone)
301-405-3542 (Fax)

Li Yang

Paris School of Economics ( email )

48 Boulevard Jourdan
E201, Building E, 2nd floor
Paris, 75014 75014
France
0769889925 (Phone)

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