Information Transmission and Market Integration: The Impact of Telegraph Construction on the Grain Markets in Late Imperial China

Abstract

How much did the telegraph improve market integration in imperial China? We exploit differences in the timing of telegraph construction in different prefectures in the late 19th to the early 20th centuries to show that telegraph presence in both prefectures decreased the monthly grain price difference by nearly 20%. Also, the telegraph boosted economic development and had a mitigating effect on rice prices when disasters occurred. The effect was also stronger for prefectures less accessible to waterways. Merchants’ trade levels, political connections, human capital, and social capital all played a role in the telegraph’s promotion of market integration.

Keywords: Chinese history, information, telegraph, grain prices

JEL Classification: JEL F14, L96, N75, O13, O33, Q11, Q13